Donating Non-Cash Assets to Donor-Advised Funds

Non-cash contributions are gifts made to a charitable organization of an asset other than cash.

The most common kind of non-cash asset to give as a charitable contribution is publicly traded stock. These assets can be freely sold on a public market to fund DAF grantmaking. Other non-cash assets which cannot be traded on a public exchange and may require additional processing and due diligence like real estate, shares of private companies or artwork are also sometimes referred to as complex, illiquid or specialty assets.

Below are some examples of non-cash assets often contributed to a DAF:

• Publicly Traded Stock (including restricted and control stock)
• Cryptocurrency
• Life insurance
• Privately held business interests
• Real estate
• Fine art and collectibles

In most cases, when a donor contributes appreciated non-cash assets held for longer than one year to NPT:

• NPT will not be subject to capital gains tax on the sale of the asset, preserving the proceeds from liquidation of the asset for future grantmaking.
• The donor will be eligible to claim a charitable deduction based on the fair-market-value of the asset.*
• The donor’s charitable deduction will be limited to 30% of the donor’s adjusted gross income (AGI), with the ability to carry any unused portion forward for up to five years.
• The donor can use one large donation to support numerous charities through a DAF—including establishing recurring grants to be issued over time.
• The donor may recommend an investment strategy for cash to grow their DAF asset value over time.
• The donor may make use of NPT’s philanthropic consulting expertise to liquidate complex assets, to more easily support charities that may not have the infrastructure to process the assets on their own.

Though “checkbook philanthropy” (via cash contribution) is alive and well, non-cash asset donations are rapidly growing in popularity among DAF donors. On average, more than 60% of contributions to NPT DAFs in a given year come in the form of non-cash assets.

*A qualified appraisal may be required to substantiate the fair market value of the contributed asset.

A wide array of asset classes are eligible for DAF contribution, which can prove very favorable if the asset has appreciated significantly. Donors who contribute appreciated non-cash assets to their DAFs can utilize the proceeds from the liquidation of the asset to fund current and future grantmaking.

While nearly all such contributions are possible, the process of contribution can be complex. No matter what stage of their philanthropic journey a donor is on, it’s always recommended to review the considerations for non-cash contributions:

• Annual Deduction Limit: There is an annual limit to how much can be deducted from income taxes for charitable contributions. For contributions of non-cash assets owned more than one year, most donors can claim up to 30% of adjusted gross income (AGI) in a given year, with a five-year carry-forward.
• Fair Market Value: Any non-cash asset with build in capital gain must be held for greater than one year prior to contribution if the donor hopes to claim a charitable deduction for the fair market value of the asset. If the asset has been held for one year or less, the donor’s charitable deduction will be limited to the lesser of the donor’s cost basis in the asset or its fair market value (if the asset has depreciated in value).
• Qualified Appraisal: For contributions of non-cash assets other than publicly traded securities, the IRS requires that the donor obtain a qualified appraisal (as defined under Section 170 of the Internal Revenue Code) of the contributed asset to substantiate the value claimed for tax purposes. The appraisal must provide a value for the asset as of the date of the contribution and may be obtained any time up until the donor files their annual tax return, though no earlier than 60 days prior to the gift. If a donor fails to obtain an appraisal, the IRS may disallow the tax deduction.