(When Is a Gift Complete for Tax Purposes? Part II)

The prescription is simple in principle, sometimes not so simple in practice:

Stick to the facts.

That’s it. It applies to all gift situations, and no one (especially a strong-willed donor) can argue rationally against it. Let’s look at some gift situations and see how to apply this prescription.

SITUATION 1: An organization receives in an envelope on January 4, a Monday, a $500 check dated December 31, a Thursday. The envelope is postmarked January 2, a Saturday.

The tax law provides a gift made by a check deposited in the mail is complete on the date of mailing, not the postmark date, provided the check clears in due course. What is the date of mailing here? It’s impossible to tell from the facts. The check could have been deposited in the mail on December 31 (after hours), January 1 or January 2.

Not to worry; simply state the basic facts on the gift receipt. What are the basic facts? They are: [1] check was received by USPS on January 4; [2] check amount is $500; [3] check is dated December 31; [4] envelope containing check is postmarked January 2. Those are the facts. (Also state, by the way, whether the donor received any goods or services in consideration of her gift.) Leave it to the donor to claim when the gift was made on her tax return. If the donor insists the gift was made in December, it’s OK to write on the gift receipt, “. . . which you have stated you mailed in December. . . .”

SITUATION 2:  An organization receives in its account on January 4, a Monday, 1,000 shares of MMM stock. The organization is able to verify the stock was wired out of the donor’s account on December 31.

We don’t know the date of gift for tax purposes; the law is unclear. But we know these facts: [1] 1,000 shares of MMM were received on January 4; [2] the shares were wired out of the donor’s account on December 31. Although the gift receipt here need not state a value for the stock, the mean values of a MMM share on 12/31 and 1/4 are facts. It’s OK, but unnecessary, to state those values on the gift receipt.

Gift receipting is important. If you think your organization’s gift receipting practice is in need of review, contact a Sharpe Group representative. It’s also good to have a clear gift acceptance policy in place. Click here to read more about gift acceptance policies.

By Jon Tidd