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By Dr. Jim Dahle, WCI Founder
Donating appreciated shares instead of cash to charity is a smart move. Using a Donor Advised Fund (DAF) can provide convenience, anonymity, and the ability to put time between the contribution and the grant. Of course, no good deed goes unpunished, and as your financial life becomes more complicated, so does the hassle factor. We recently received this question via email:
“Hi WCI Team!
I took Jim's advice and donated appreciated shares to my DAF in 2022. I really love being able to flush my appreciated shares out of my portfolio while also supporting charities. I'm now starting my taxes. TurboTax says I need to complete IRS form 8283 since I donated more than $5,000 in shares. The form requires me to list the dates I acquired the share and also my cost basis for those shares. The problem is that I can't find that information on Vanguard's site. I reached out to Vanguard, and they were of no help to me. Any idea how I can determine the correct numbers to report?”
Well, it's disappointing that Vanguard customer service could not help. I often find the issue is that you didn't use the right words to get what you want, and inexperienced call center staff are not financially literate enough to read between the lines. However, you'll be pleased to know that the Vanguard IT staff, as bad as it might be, comply with federal law and ensure all of this information is available to you on the website. Let me see if I can help you find it.
IRS Form 8283
IRS Form 8283 is simply where you report non-cash charitable contributions/donations. The rules are that if you donate something worth more than $5,000, you have to get an appraisal. However, there is an exception for publicly traded securities like the stock, ETF, and mutual fund shares that white coat investors typically donate to DAFs in lieu of cash. That exception makes sense since publicly traded securities are “appraised” at least once every day the market is open and that appraisal value is public knowledge. The form looks like this:
As you can see, our dear WCIer will be filling out Section A. I don't know what DAF he uses, but I use the Vanguard Charitable DAF, so I'd put that name and address in Box A. No, it's not in Malvern. It's not even in Pennsylvania.
- Vanguard Charitable
- 2670 Warwick Avenue
- Warwick, RI 02889-9509
Skip Box B, that's for when you donate that Tesla to the kidney foundation in a few more years. Box C would include the ticker symbol and number of shares. Yes, the instructions say to include all of this info:
For securities, include the following.
- Company name
- Number of shares
- Kind of security
- Whether a share of a mutual fund
- Whether regularly traded on a stock exchange or in an over-the-counter market
But I figure the ticker symbol pretty much answers 1, 3, 4, and 5, no?
Box D is the date you contributed the money to the DAF. Box E is the date you bought it. Simply put “Purchase” in box F (other possible answers include “Gift,” “Inheritance,” and “Exchange,” but your life will be much harder if you put Gift or Exchange down since you're really going to have to hunt for the cost basis). Box G is your cost basis, i.e. what you paid for it. For mutual funds, simply multiply the price per share on the date you bought it by the number of shares you bought. For ETFs and stocks, you'll need to know the exact price you paid. Box H is the fair market value (i.e. what it was worth on the day you contributed it to the DAF). While this is also easily calculated using publicly available share values (close enough is probably fine), the easiest way to do this is to use the number the DAF reported when it recorded the contribution. Then, everything is in agreement if you ever get audited. Box I is the method you used to make that valuation. Just write “Public database.” “Appraisal” or “comparable sales” are other answers often put in this box, but they're really not appropriate for publicly traded securities.
Easy peasy. If you can't handle this form, you probably shouldn't be doing your own taxes.
More information here:
Finding the Basis and Fair Market Value
With that background information out of the way, let's answer the questions. Where do you find the information for the basis and the fair market value? Let's do the basis first.
Finding Cost Basis
This is super easy if you didn't donate the entire tax lot. You simply log into Vanguard.com, click on “Holdings,” click on “Cost Basis” and open “Unrealized gains/losses” from the drop-down menu. Scroll down to the rest of the tax lot from which you donated. There you will see the value per share on the day you purchased that tax lot. Multiply that by the number of shares donated and put the product of that calculation into Box G.
The only number you need from that screen is the one I didn't black out. In this case, that's $54.42 per share. This is the same screen you looked at before donating shares (and tax-loss harvesting), I hope. Two things to make sure of before donating are that:
#1 You actually have a gain (i.e., a green number on that line) and that
#2 The gain is in the long-term and not the short-term column.
Donating shares with a loss kind of defeats the point (sell it first so you can use the loss on your taxes), and if you donate shares that you have not owned for more than a year, you only get to deduct the basis, not the fair market value. You may be leaving a lot of money on the table if they appreciated a lot.
If you donated the entire tax lot, you won't find that tax lot under the “Unrealized gains” tab or the “Realized gains” tab on Vanguard.com. It's not even under the “Gifted” tab (no, I have no idea why since that seems like a great place to put it.) You'll have to go back to the original purchase and look up what your cost basis was. After logging in, click on “Activity.” Scroll down to the account from which you donated and change the dates to some length of time (such as five years) that includes the time period when you bought the security. Then, scroll down to the date of purchase and see what you paid for it. You can make it easier just by setting it to only show “Buy” transactions. It'll look something like this when you find it:
It tells you the date of purchase (3/16/2020), what it was (ITOT), the type of transaction (“Buy”), the number of shares (blacked out), the cost per share ($54.42), the commission on the transaction (free), and the total transaction value (blacked out.) If you donated the whole tax lot, you can just put the total transaction value into Box G. If you donated part of the tax lot previously, you'll need to multiply the cost of purchase ($54.42) by the number of shares donated.
Finding Fair Market Value
While this can also be calculated by multiplying the price on the day you transferred the asset to the DAF by the number of shares donated, the DAF will do this for you. I suggest you just use their number. At Vanguard Charitable, you log in, click on “Contributions,” click on “Completed contributions,” and find that particular donation. Your number is labeled “Amount.” It looks like this:
Yes, my middle name is Melvin. Just like the first name of both of my grandfathers. Fun fact! As the oldest son, it was pretty much a done deal long before I was born. But at least my parents didn't try to give me my sibling's name, unlike my two older sisters (this was in the days before ultrasound-guided gender reveals involving aeronautical flyovers with blue or pink smoke, for you young folks.)
OK, enough genealogy. Now you know how to make sure that awesome thing you did (giving a bunch of money to charity) also gives you the maximum tax benefit (saved capital gains taxes and a charitable donation deduction).
More information here:
The Rest of the Story
When I turn someone's question into a blog post, I usually send them an advance copy. Here was the response:
“I did get a hold of Vanguard. I think I can answer why donated shares are not showing up under the donated share tab (where I agree it should be). According to the Vanguard Tax Resolution Services team, appreciated shares donated to certain charities, including many religious charities and Vanguard Charitable, does not report properly on the Vanguard website. Once I got the right team on the phone, they were super familiar with my question, knew exactly how to get the information, and gave me everything I needed in less than five minutes. They did mention this was a known problem, but due to some back-office complexity, it was not expected to be resolved anytime soon.
I'll do a better job keeping records next time or follow your recommended steps in the post. Thanks again for all your help. Here I was thinking this was a stupid question—nice to see that you thought there was enough value to turn my question into something bigger!
What do you think? How do you get your cost basis and fair market value for charitable donations? Comment below!