Accepting Illiquid Assets: The Devil is in the Details

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I was delighted to join the Partnership for Philanthropic Planning of Tampa Bay today for a program on accepting illiquid assets. My fellow panelists were Frank J. ‘Sandy’ Rief, III, a shareholder with Allen Dell Attorneys at Law, and Deborah McCarthy, CFO, Boys & Girls Clubs of Tampa Bay. Beverley McLain, Senior Vice President of Philanthropic Services, Community Foundation of Tampa Bay expertly facilitated the program.

As promised, here are the links to the resources that were mentioned during the program. If you weren’t able to join us, never fear – these resources can be useful to all nonprofits and donors. 

Let me start by covering a few questions that were discussed:

‘What’s an illiquid asset?’ An illiquid (or non-cash) asset is anything that can not easily be sold or exchanged for cash. Be careful that you don’t interpret ‘can not easily’ for ‘can’t ever.’ Illiquid assets can be sold, just not as easily as an asset like stocks. I would simplify the definition to something you can’t deposit in your bank account or a brokerage account. These items include artwork, real estate, and jewelry.

‘Should I care about this at all?’ I think you should if you are raising support for a nonprofit organization. There are many opportunities to accept illiquid assets but you have to be well informed. For instance, a donor could give your organization a building that becomes your permanent location. There are substantial tax benefits for the donor and your organization receives a valuable asset.

‘Is there any risk for my organization?’ Absolutely! That’s why you need to do your homework before accepting any non cash gifts. Several examples were cited of organizations that accepted non cash gifts that have eventually cost the organization more than the value of the gift. The first step in protecting your organization from unnecessary risk is to create gift acceptance policies.

‘How does my organization proceed?’ Carefully and armed with plenty of resources! Here you go:

Resources

Gifts of Non-Cash Assets
Community Foundation of Tampa Bay – Specific Property Gifts

Gift Acceptance Policies
Association of Fundraising Professionals (AFP) – Sample Gift Acceptance Policies
Partnership for Philanthropic Planning (PPP) – Model Documents
BoardSource – Nonprofit Policy Sampler
Kathryn Miree and Associates – Sample Gift Acceptance Policies

IRS Forms and Publications
Publication 526 – Charitable Contributions
Publication 561 – Determining the Value of Donated Property
Form 8283 – Noncash Charitable Contributions
Form 8282 – Donee Information Return

Ethics
AFP Code of Ethical Principles and Standards
The Donor Bill of Rights

One of the most important takeaways from today’s session: know when to ask for help. I am not qualified to give tax or estate planning advice. But I do know when to call the experts.

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