Stock Donation transaction code

ewoldde9

NOTE: I posted a general entry in the Community, but now I found that this is probably the correct place for requests.

Last year I hit some stop-losses and sold some stocks with considerable unrealized gains and was hit with a significant tax bill (I should have been taking some profits along the way). When I made my budget for charity this year I chose to make some contributions with shares of stock--especially those with more the 1,000% gains--instead of cash.

With a lot of head scratching I came up with the steps to record one of these donations--

1. Make sure your broker does the transfer correctly—verify it with your charity.
2. Calculate the value of the donation using the average of the day's high and low (per current IRS regulations). Verify this with the charity.
3. Remove the shares in Quicken specifying the specific lot.
4. Add shares (NOT "Buy" shares) with the original acquisition date and the calculated value.
5. Sell shares with the date of the transfer and the calculated value—this gives you no capital gains, which is the reason for the donation in the first place.
6. Withdrawal transaction to spend cash to a Charity category to offset the dummy sale.
7. Add memos to everything along the way.

I found that Quicken takes care of a lot of details while doing this (stock splits, cost, etc.). However I would ask that you consider adding a new 'Action' code such as 'Stock Donation' that would do all of this for me. (You might even consider the work to add it as a charitable contribution.) It would have to ask for the specific lot to use, the (prior) date when the transfer was done (in order to check the price history), and the name of the charity to be added in memos of the generated transactions. If the IRS changes the way the value is calculated, you may need to add the value as another input.

Thank you, for considering this.

Jim_Harman

I'm not sure this should get its own Action, but it could get a selection under Enter Transactions that would provide the needed transactions - Remove Add Sell Withdraw

ewoldde9

Fine—to me, that's the same thing.

Actually, I am not sure what the difference is.

Thanks.

Jim_Harman

An Action is an item in an investing account's Transaction List (register) - Bought, Sold, Added, Removed, Div, ReinvDiv, etc. Usually this corresponds to 1 low level transaction, but ReinvDiv is 2, Div and Bought.

When you click on Enter Transactions, some of the choices produce 1 Action but others can produce a whole slew of Actions.

I don't think these selections have an official name, sometimes they are called Macro Transactions.

ewoldde9

Thanks, that makes sense, and it had never occurred to me.

q_lurker

I make those types of donations annually using exactly that type of procedure. I am not sure I would want Quicken to automate it too much. Don't fully trust them to get it right (as I might define right).

If they did develop that level of macro-transaction, I would want to be prompted for:

• Date
• Security
• Shares (with specific lot selection option and max gain a click for that selection - like existing sales lot specification)
• Total Donation value (I don't want Quicken to try to calculate that from recorded prices)
• Receiving Charity
• Memo (applied to each generated transaction)

The generated Add Shares needs a Date Acquired filed entry. I typically make that the most recent of the specified lots. I don't think the date is truly relevant other than the generated Shares Sold then needs to definitively reference that specific added lot.

There are times I will donate more than one security to one organization. The above code would generate a separate withdrawal for each security. I would then consolidate the several to a single withdrawal. That is better left to the user rather than the programming.

I'll go ahead and vote up the idea to help give it traction.

ewoldde9

First, I think it would be a good idea to automate it because it has to be done correctly if you don't want any capital gains generated and you definitely do not want the cash balance affected.

Second, the reason you might need the date acquired (better yet, the specific lot) is if any splits have occurred and so that Q can adjust the cost basis (it does that with the Remove transaction).

You would probably also have to combine the charity and the memo.

ewoldde9

As I reflect further on it, I agree it would probably be better to have the Value as an input instead of having Q calculate it.

If IRS changes its method, it would require a change that would have to be based on the date. They might check with contacts at Turbo-Tax about how likely that would be.

I also had one of my charity, in their acknowledgement, say that for their purposes they use the closing price, but that I should check with my 'tax advisor' about the value to use for my taxes.

Barron_Wuffett

When donating stock to charity, I understand the need to remove shares, but what is the reason to add the shares back and sell those shares? Quicken didn't generate a cap gain when removing shares, from what I could tell.

Couldn't I just remove the donated shares, add cash for the amount of the donation, and finally remove that cash as a "check" to the charity to record it as a donation when reporting?

Jim_Harman

@Barron_Wuffett (clever name BTW) your method would probably work - shares and their cost basis gone, no capital gain recorded, no impact on cash balance, market value recorded as a charitable donation - but in some situations adding the cash would show up as income. For example this would happen if you ran a report with Transfers set to Include all.

I think adding the shares back is a little cleaner.

q_lurker

There is a subtle impact on the Investment Performance Report and related Average Annual Return (IRR) calculations. The recommended Remove Add Sell Withdraw procedure produces the following:

• Remove - Return = Shares * Closing value for the date
• Add ——— Investment = Shares * Closing value for the date
  • Those two cancel each other for no net impact on the IRR value
• Sell — is just a conversion of the share valuation to cash; no impact on the performance
• Withdraw - Return = value of the gift
  • The net effect is that the value of the gift represents the only return from the account that impacts Average Annual return

If a Remove - Add Cash - Withdraw cash procedure is used, the report offers

• Remove - Return = Shares * Closing value for the date
• Add Cash - Investment = adding in the value of the gift
• Withdraw - Return = Value of the gift.

In that second case, the 'return' for the report is the Shares * closing value which typically would not be the same as the gift. value. Frequently, the gifted shares are valued as the average of the open and close or hi and low trade values; thus different than the close.

I will add that in older versions of the program, the return valuation of removed shares for this report was cost basis, rather than closing value on the date of the gift. That was a much bigger difference. With the current report programming and calculation, your suggested procedure could be 'close enough'.