Remember the scene from Forest Gump when Forest opens up a large envelope from a company that his partner, Lieutenant Dane, had been investing in? Turns out the company was Apple. Forest no longer needed to be a shrimper.
I had a Forest Gump moment. Or I was hoping it was one, anyway. When my dad died, my sister came back from a visit to the bank and the safe deposit box where my parents always had kept their many valuables. Or so we always thought. Unfortunately, there was no gold or silver, but there was a stock certificate for 100 shares of Alabama Oxygen in my name. Alas, after some extensive research, the stock had no current value.
So what if a congregant gifts 100 shares of a company that has yet to go public to the synagogue? What is known as closely held stock? Do you accept it? You can’t easily sell those shares in the same way that you can 100 shares of IBM, Apple, or GE.
What if a congregant gifts 100 shares of Apple to the synagogue? The synagogue treasurer calls a congregant who is also an investment banker who consults with his firm’s tech analyst. He reports back that the analyst feels that Apple stock is about to split, within the next 3-4 weeks. He suggests that the Treasurer hold on to the stock and sell it after this happens.
Playing the market is something you can do with your own money, but not that which belongs to the community.
What if a congregant wants to gift a piece of art that has been on display in their home? The artist is well known, according to the congregant, and that artwork is worth more than $10,000, for sure, he tells the synagogue treasurer.
Assigning value to closely held stock, publicly held stock, gifts of art or even real estate is essential. Such value is key to providing a receipt to the donor that they can use for taking a deduction on their income taxes.
For publically held stock, determining value is pretty straightforward. You determine the fair market value of the stock – the average of the high and the low on the date that the synagogue receives it. It is not based on the sale prices on day the stock is sold by the synagogue, or even the proceeds. These are the IRS guidelines.
It is often hard to determine the value of closely held stock. And the responsibility for determining such value is on the donor, not the synagogue. This is also true for gifts of art, real estate, or any real property. The person donating such a gift also has the responsibility to pay for the appraisal at the time that the gift is made to the synagogue.
Synagogues are not in the business of playing the market or speculating regarding the sale of stock or real estate. When you received the gift of 100 shares of Apple, you want to sell it as quickly as possible. What if the stock doesn’t split? What if the value goes down? Sell the stock and put the proceeds to good use is always the goal.
And what is a synagogue going to do with artwork or even real estate? If the artwork is not going to be displayed, it needs to be sold as quickly as possible. Synagogues are not equipped to manage or to develop real estate. Here, too, selling such property quickly needs to be the goal.