Question: How should you handle gifts of closely held stock?
Question: Given recent events, I'm concerned about what to do when a donor would like to give closely held stock. Should we avoid closely held stock? What's the best way to handle these gifts?
Answer:
"Closely held stock" is the term used to describe stock in private companies, typically for situations where a company's shares are owned by one individual or a small group of stockholders.
First, there is nothing wrong with accepting a gift of closely held stock. However, there are certain unique precautions that need to be taken into account to accurately value and record the gift and protect your organization.
Whenever there is a gift of closely held stock, the first thing to do is to recognize that there is no guarantee that the security can or ever will be sold.
Second, you do need to assign a value to the gift. Normally, this transaction is the redemption of the stock by the corporation. However, if no redemption has occurred during the reporting period, it's time to enlist an independent certified public accountant (CPA). The CASE Global Reporting Standards, which adhere to GAAP, FASB, and IRS guidelines, explain that the CPA who you enlist also needs to maintain the books for the corporation in order to be qualified to value the stock.
Third, it's time to vet whether or not this gift of closely held stock makes sense for your organization. This is where your gift acceptance committee comes in. They should conduct a careful review as to whether the nature of the business of the institution it is about to become a partial owner of is consistent with the organization's own mission.
It is only after all of these checks and balances have been completed that any documentation of the gift would begin or any public announcement prepared.
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