Setting Up Stock Gifts / Donations

We have a number of sites that receive stock donations. The general practice, is to value the stock at time of gift. This is the valuation for the tax receipt the donor receives.

The theatre can keep the stock (perhaps for an endowment investment) or turn it over to a broker to sell it under the direction of the theatre.

The donation value is most often recognized at the time of the gift. The amount actually received can be more or less than that valuation.

To handle this, yopu create a payment method called 'stock gain/loss' to be written off to a special account. You create this new payment method in code tables. For more information on code tables, click here.

For example: A patron gives $1,000 in stock.
The stock is sold for $1,010.
There are two payments for the gift. One of $1,000 check from the broker, and one of $10 gain/loss. The donor gets receipted for the $1,000 only, the $10 adjustment is the gain/loss.

For future reference, in the donations notes field, you can include the information regarding amount of shares, at what price, and when you sold them in the donation notes field.

Should you create the GL account as an expense account or revenue account?

Typically, the stocks should be increasing in value (or at least you hope so!), so the Stock Gain/Loss GL account should be created as a revenue account by default.

The required GL Accounts are:

  • Stock (Asset) - only if you keep Stock in the current form as Stock to be sold at a later date
  • Stock Gain/Loss (Revenue GL Account)

The account numbers and actual type are defined by your accountant.

Any brokerage fees (hopefully you have a generous broker who does not keep the fees) are treated the same way as a Gain/Loss on the sale of the stock.

Example A:

Receive $1,000 Stock and keep it as stock

Donation $1,000

Payment Method = Stock $1,000 (goes into the GL as a debit/asset)
Tax Receipt = $1,000

Sell the Stock ($1,000) that was initially entered as Payment Method Stock for a surrender value of $1,200

Payment Method = Stock -$1,000 (to remove the initial stock asset)
Payment Method = Cash $1,200
Payment Method = Stock Gain/Loss -$200 (goes into the GL as a credit/gain)
Tax Receipt - none at this point because it was already issued during initial receipt of stock

OR Sell the Stock ($1,000) that was initially entered as Payment Method Stock for a surrender value of $900

Payment Method = Stock -$1,000 (to remove the initial stock asset)
Payment Method = Cash $900
Payment Method = Stock Gain/Loss $100 (goes into the GL as a debit/loss)
Tax Receipt - none at this point because it was already issued during initial receipt of stock

Example B:

Receive $1,000 Stock, Convert it to Cash for $1,010

Donation $1,000

Payment Method = Cash $1,010
Payment Method = Stock Gain/Loss -$10 (goes into the GL as a credit/gain)
Tax Receipt = $1,000

Example C:

Receive $1,000 Stock, Convert it to Cash for $990

Donation $1,000

Payment Method = Cash $990
Payment Method = Stock Gain/Loss $10 (goes into the GL as a debit/loss)

Tax Receipt $1,000

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Explanation