Hi Folks, This is a really difficult question. My dad was kind enough to put some stock in my name in the 80's in a custodial account. i've been paying taxes on the dividends for 40 years. i donated that stock to a charity in 2023. My questions are the following:
(1) Form 8283 asks "How acquired by donor" Was this acquired via gift or purchase?
(2) If gift, turbotax does not give me the option of entering gift, only purchase. How do i enter it as a gift?
(3) Is my deduction the value of the stock when donated or the value of the stock when my dad bought it in my name back in the 80s?
Thank you so much for your help. i've asked some difficult questions in the past and so grateful for the help i've received.
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(1) Form 8283 asks "How acquired by donor" Was this acquired via gift or purchase? you say it was gifted to you
(2) If gift, turbotax does not give me the option of entering gift, only purchase. How do i enter it as a gift?
Not sure what you are doing but there should be a drop-down box that lets you select purchase, gift, inheritance, exchange, or created.
(3) Is my deduction the value of the stock when donated or the value of the stock when my dad bought it in my name back in the 80s. see below. also, if restrictions are imposed, FMV might not be appropriate
Turbotax seems to have questions or remarks that seem inconsistent since you are contributing Long-term Capital gain property
donation of Capital Gain Property. Generally, the deduction is FMV for property that would generate long-term capital gain if sold at FMV on the contribution date.
exceptions to use of FMV
1) the stock is not qualified appreciated stock and is contributed to a private operating foundation. QAS is corporate stock that is long-term capital gain property for which market quotations are readily available on an established securities market. quotations from a brokerage firm do not meet this test. QAS does not include any stock if the taxpayer and his family have contributed (considering all prior contributions) mote than 10% of the value of all the corporation's outstanding stock. However, shares in open-ended mutual funds are treated as QAS if quotations are readily available in general circulation newspapers. (LTR RUK 199925029)
2) you elect to apply the 50% of AGI limit rather than the normal 30% of AGI limit that normally applies to donations of capital gain property.
I agree with Mike9241 that TurboTax doesn't seem to handle donations of stock very well. There are questions it should ask that it doesn't ask, so it is effectively making assumptions that might or might not be correct.
I have answered your questions below as well as I can with the information that you provided. More details are needed to be able to give you more specific answers, especially concerning how to make the entries in TurboTax.
Are you using TurboTax Online or the CD/Download TurboTax software? If you are using the CD/Download software, are you entering the donation in the Step-by-Step interview or are you making entries in forms mode?
You said you paid tax on the dividends over the years. Did you take the dividends in cash, or did you reinvest the dividends in additional shares of the same stock? Have you previously sold any of the stock prior to making the donation to charity?
I assume that the stock is ordinary stock that is publicly traded on a stock exchange, and that it is not a mutual fund. If that's not true, provide details.
(1) Form 8283 asks "How acquired by donor" Was this acquired via gift or purchase?
Technically, if your father put money into the custodial account, then used the money to buy stock, you acquired the stock by purchase. The money was the gift. It became your money as soon as it went into the account. But if your father owned stock and transferred shares that he owned into the custodial account in kind, then you acquired the stock by gift. Any shares that were purchased with reinvested dividends were acquired by purchase.
(2) If gift, turbotax does not give me the option of entering gift, only purchase. How do i enter it as a gift?
For practical purposes, I don't think it matters whether the stock was acquired by gift or purchase. Your deduction is going to be the same either way. Since designating it as acquired by gift in TurboTax is not straightforward, it would be easier to just leave it saying purchase. (The situation might be different if your father transferred shares in kind, so that the shares were a gift, and the value when you donated them was less than what your father paid for them, but that's an unlikely scenario for stock that was purchased 40 years ago or more.)
(3) Is my deduction the value of the stock when donated or the value of the stock when my dad bought it in my name back in the 80s?
For any shares that you owned for more than a year before donating them, your deduction is the market value on the date of the donation. You were the owner of the custodial account from the beginning, so all of that time counts as time that you owned the shares.
You may have owned some of the donated shares for a year or less because they were purchased by reinvesting recent dividends. You would have to enter those shares as a separate donation because the rules for the deduction are different. The deduction for shares that you owned for a year or less depends on whether the value on the date of the donation was higher or lower than what you paid for them. If the value on the date of the donation was higher than what you paid for them, your deduction is the amount that you paid to purchase them. If value on the date of the donation was lower than what you paid for them, your deduction is the market value on the date of the donation.
Are you kidding me? Thanks you so much rjs. i cannot believe how detailed your answer was. Believe it or not, i was thinking the exact same thing - the cash to purchase the shares was the gift, not the stock. i cannot tell you how helpful and thorough your answer was. Every single question answered without missing a single nuance and with clarity. i wish i could do something for you. God bless you and your family!!!
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