How to Accept Stock Donations for Nonprofits

To accept stock donations, a nonprofit needs a brokerage account that can receive securities, a written gift acceptance policy, transfer instructions to hand to donors, and a workflow that meets IRS rules for valuing, acknowledging, and reporting the gift. Setting these pieces up once lets your organization take in appreciated shares, which many donors prefer to giving cash because they avoid capital gains tax on the appreciation and can deduct the full market value.

Open a Brokerage Account

A business bank account cannot hold publicly traded shares. Your organization needs a dedicated brokerage account opened through a licensed broker-dealer, which becomes the holding vessel for donated stock, mutual funds, or exchange-traded funds.

When the account is opened, the broker-dealer assigns your organization a Depository Trust Company (DTC) participant number, a unique four-digit identifier the industry uses to route and settle securities transfers electronically. The firm also gives you an account number that directs shares to your specific account within that firm. Both numbers go to every donor who wants to transfer securities.

Adopt a Gift Acceptance Policy

Before you start soliciting stock gifts, put a written policy in place that covers securities. It sets the ground rules for what your organization will accept, how quickly donated shares get liquidated, and who has authority to approve unusual gifts.

At a minimum, the policy should address:

Publicly traded securities, including how you’ll track the timing of the gift, the transfer, and any subsequent sale for accounting and donor reporting.
Closely held or restricted securities, including how you’ll evaluate marketability and legal restrictions before accepting, and when to bring in legal counsel.
Liquidation procedures: whether shares are sold immediately on receipt or held, and who authorizes the sale.
A gift acceptance committee empowered to make timely decisions on complex offers.

Most organizations sell donated shares promptly to avoid market risk. A clear liquidation rule also simplifies accounting and captures a value close to what the donor intended to give.

Give Donors Clear Transfer Instructions

A clean transfer depends on accurate routing information. Prepare a short instruction sheet, posted on your website or sent on request, with the fields a donor’s broker will need:

The name of the brokerage firm where your account is held.
Your organization’s account number at that firm.
The DTC participant number for your brokerage firm.
The exact legal name your account is registered under.

The donor uses this information to complete a Letter of Instruction (sometimes called a Letter of Authorization) and submits it to their own brokerage firm. The letter identifies the donor’s account, names the security and ticker, states the number of shares, and gives your organization’s receiving details. Some firms use their own proprietary transfer forms instead. Donors typically submit through an online portal or mail a signed paper copy.

Every field has to be right. If the DTC number, account number, or registration name is wrong, the clearinghouse rejects the transaction and the donor has to resubmit. A pre-filled template cuts down on these errors.

How the Transfer Settles

Once the donor’s broker receives the instructions, it initiates an electronic delivery through the DTC system to your brokerage firm. The sending firm confirms the shares are available and the receiving firm agrees to accept them. For publicly traded stocks, this usually takes three to five business days. During that window, the shares leave the donor’s account and appear as a pending transaction in yours. The transfer is complete when the shares are credited to your balance.

Mutual fund shares take a different path and can take several weeks, because mutual funds do not settle through DTC the same way individual stocks do. If you expect mutual fund donations, build in extra lead time and tell donors up front.

Year-End Deadline

For a stock donation to count toward the donor’s deduction for a given year, the transfer must be complete by December 31. The gift date for an electronic transfer is the date the shares arrive in your organization’s account, not the date the donor initiated the transfer. Donors who wait until late December risk missing the deadline. Encourage them to start well before mid-December, and confirm completion with your broker. Holiday schedules can add delays.

Value the Shares on the Delivery Date

The IRS sets the formula. Fair market value equals the average of the highest and lowest quoted selling prices on the date the transfer completed, which is the date the shares landed in your account.¹ If a stock’s high that day was $50 and its low was $46, fair market value is $48 per share.

If no sales occurred on the delivery date, use a weighted average of the nearest sales dates before and after, with the weighting inversely proportional to the number of trading days between those dates and the delivery date. If there’s no sales data at all, use the average of the bid and asked prices on the valuation date. Publicly traded mutual fund shares with daily published quotations follow the same approach.¹ Record the value in your financial records when the gift is received.

Send a Written Acknowledgment

Federal law requires a contemporaneous written acknowledgment for any charitable contribution of $250 or more.² Without it, the donor cannot claim a deduction. The letter must include:

A description of the property, meaning the name of the company and the number of shares, but not a dollar value.²
A statement of whether your organization provided any goods or services in return, and if so, a good faith estimate of their value.¹

Valuing the deduction is the donor’s job, not yours. Putting a dollar figure on the acknowledgment is unnecessary and can create problems if the donor’s number differs. The letter must reach the donor before the earlier of the date they file the return reporting the gift or the filing deadline (including extensions) for that return.² Sending it promptly after the shares hit your account is the safest practice.

File Form 8282 After You Sell

If your organization sells, exchanges, or otherwise disposes of donated property within three years of receiving it, you must file IRS Form 8282 within 125 days of the disposition and give the donor a copy. The requirement does not apply if the property was valued at $500 or less when the donor signed Form 8283.³

Because most organizations liquidate shares soon after receipt, Form 8282 is a routine part of processing stock gifts. Build the filing into your post-sale workflow so the 125-day deadline doesn’t get missed. As a tax-exempt organization, you generally owe no federal income or capital gains tax on the sale proceeds.

What Donors Will Ask About Their Deduction

You are not the donor’s tax advisor, but you’ll get the questions. The key factor is how long the donor held the shares.

Shares held more than one year qualify as capital gain property. The donor can generally deduct the full fair market value on the date of the gift and owes no capital gains tax on the appreciation.⁴ This is why giving stock is more tax-efficient than selling and donating cash.

Shares held one year or less are treated differently. The deduction is generally limited to the donor’s cost basis, meaning what they originally paid, rather than the current market value.⁴⁵

A donor’s deduction for appreciated stock given to a public charity such as a 501(c)(3) is capped at 30% of adjusted gross income for the year. Amounts above the cap carry forward for up to five years, subject to the same percentage limits.⁴

On the donor’s return, publicly traded securities are reported on Section A of IRS Form 8283 whenever the total noncash deduction exceeds $500, regardless of the gift’s value. Most noncash donations over $5,000 require Section B and a qualified appraisal, but publicly traded securities with readily available quotations are exempt from the appraisal rule and stay on Section A.⁶¹

Handle Restricted and Closely Held Shares Carefully

Not every stock gift involves shares trading freely on an exchange. Donors sometimes offer restricted securities, meaning shares acquired directly from the issuer or an affiliate outside a public offering, or closely held stock in a private company. Both need extra scrutiny before you accept.

Restricted securities are governed by SEC Rule 144, which imposes a holding period before resale. If the issuing company files reports with the SEC, the minimum is six months. If it does not, the minimum is one year. When a donor gives restricted shares to a charity, the donor’s original acquisition date carries over to the organization for holding-period purposes.⁷ Verify the holding period has been satisfied before accepting, because shares you cannot sell tie up resources and create valuation uncertainty.

Closely held stock has no public price. The donor needs a qualified appraisal to support any deduction over $5,000; the publicly traded exemption does not apply.¹ Your gift acceptance policy should require a review of the company’s governing documents to confirm additional owners are permitted and the shares are free of debt or other encumbrances. Legal counsel before acceptance protects your organization from inheriting ownership in a company with liabilities or restrictions that limit the gift’s value.

1
Internal Revenue Service. Publication 561, Determining the Value of Donated Property
2
Office of the Law Revision Counsel. 26 U.S. Code 170 – Charitable, Etc., Contributions and Gifts
3
Internal Revenue Service. Charitable Organizations: Substantiating Noncash Contributions
4
Internal Revenue Service. Publication 526, Charitable Contributions
5
eCFR. 26 CFR 1.170A-4 – Reduction in Amount of Charitable Contributions of Certain Appreciated Property
6
Internal Revenue Service. Instructions for Form 8283, Noncash Charitable Contributions
7
eCFR. 17 CFR 230.144 – Persons Deemed Not to Be Engaged in a Distribution and Therefore Not Underwriters