D.1. Securities
Spring 1992
Development Policy and Administration Manual
Chapter IV. Gift Administration Procedures
Section D. Special Procedures for Various Types of
Noncash Gifts
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SECURITIES
Securities include primarily stocks and bonds. For reporting
purposes, promissory notes and life insurance policies that are
surrendered for cash are also considered to be securities. The
Treasurer is the official custodian of all securities belonging
to The Regents. Therefore, all such securities must be trans-
mitted to the Treasurer directly by the donor or immediately on
receipt by the campus.
In July 1986, The Regents approved a three-year phased program,
beginning January 1, 1988, to divest itself of securities invest-
ed in companies doing business in South Africa. Athough the
program includes ongoing restrictions against acquiring new
investments in such companies, such securities may be accepted as
gifts.
The Treasurer's Office is to be contacted about any technical
questions regarding the transfer of securities to The Regents.
More general questions about securities as gifts or their
processing through the system are to be addressed to Development
Policy and Administration, Office of the President.
Before accepting securities, a campus must ascertain whether they
are marketable by calling the Treasurer's Office or a broker.
Although unmarketable securities may be accepted by The Regents,
the campus should be aware that they will provide no immediate
benefit and their future benefit is a calculated risk (see
"Accounting for Securities," below).
Transferring Securities to the University
Securities may be transferred to the University in one of two
ways.
(1) Securities eligible for Depository Trust Company (DTC)
tranfers should be transferred to The Regents' custodian
bank through the donor's bank trust department or a
securities broker. These agents should be instructed to
contact the Treasurer's Office immediately for instructions
regarding the disposition of the securities. [Note: Only
the Treasurer may authorize the sale of securities on
behalf of The Regents.]
(2) Alternatively, certificates bearing the name of the donor
may be endorsed to RUCAL & CO. and transmitted to the
Treasurer directly by the donor or by the campus. Donors
may mail to the Treasurer's Office either:
(a) an unendorsed stock certificate and a signed stock
power naming RUCAL & CO., each mailed in a separate
envelope, or
(b) a dated stock certificate endorsed to RUCAL & CO.
In either case, the Treasurer's Office must be informed of the
donor's intended purpose for the gift, so that the correct campus
and account may be credited.
THE TREASURER'S OFFICE GIFT COORDINATOR MAY BE CONTACTED BY
CALLING THE TREASURER'S OFFICE AT (510) 987-9600.
Valuation of Securities
Publicly traded securities. Internal Revenue Service (IRS)
regulations define publicly traded securities to mean securities,
including mutual funds, for which market quotations are readily
available on an established securities market. Securities,
however, that otherwise would be considered to be publicly traded
securities are excluded from this definition if they are subject
to restrictions, or if the amount claimed as a deduction for the
contribution of such securities differs from the amount listed in
market quotations (e.g., when selling large blocks of stock at
once would depress their price).
In conformance with IRS rules, publicly traded securities are
valued at the mean selling price on the valuation date. For
unlisted securities (e.g., over-the-counter stock), the value is
determined by using the mean selling price on the date of
valuation or, if there were no sales on that date, by using a
weighted average of the means of sales on the nearest dates
before and after the date of valuation. The valuation dates used
for all securities are:
a. if hand-delivered, the date when a properly endorsed
stock certificate is surrendered to a University repre-
sentative in the Treasurer's Office;
b. if sent by mail or fax machine, the date of mailing or
faxing, provided the securities and the Stock Power
form are received in a form negotiable by the
University; and
c. if transferred through the donor's agent, the date the
security is transferred into the Regents' name (or
RUCAL) on the books of the issuing corporation.
Nonpublicly traded securities. Donors are required to obtain a
qualified appraisal of the value of nonpublicly traded stock
valued at $10,000 or more (see Sections IV: C.2 and IV: C.3).
Tax Deduction for Securities
Securities are deductible at their full fair market value if they
have been owned for the required holding period for long-term
capital-gain treatment, subject to the applicable Internal
Revenue Code percentage of adjusted gross income limitations and
carryover rules.
Documenting Gifts of Securities
When securities are received in the Treasurer's Office, they are
valued as explained above. The Treasurer's Office enters the
gross valuation on the Treasurer's Gift Notice (TRS) form (see
end of section). These forms are then sent to Development Policy
and Administration, Office of the President, to be coordinated
with any background on the gift that is available there. Devel-
opment Policy and Administration then forwards the TRS form and
other documentation of the gift to the campus Private Support
Management Office as background for preparation of the gift form.
After completion at the campus, the gift form is distributed in
accordance with usual procedures.
Gifts received in the form of securities should be reported as
securities even if they are converted into cash by the Univer-
sity. See Section V: B.6, Type of Asset, for additional informa-
tion about reporting securities.
Acknowledging Gifts of Securities
There is no legal requirement to provide donors with a valuation
of securities when acknowledging such gifts. Although the
University must provide the donor with a description of the gift
sufficient to link it to the donor's records, it is suggested
that quotations of value for gifts of securities be avoided
whenever possible. The University's valuation may taint the
valuation process from the IRS's viewpoint; at best it is an
added and irrelevant piece of information, and at worst the
University may inadvertently provide erroneous information that
the donor relies on to his or her disadvantage. In addition,
providing values to donors may be bad rather than good for the
University's relations with them, since it could lead to dis-
agreements.
It is therefore suggested that gifts of securities be documented
by a description of the gift that clearly ties it to the donor's
records (e.g., 100 shares of ABC common stock), leaving documen-
tation of the exact date and amount of the gift to the donor.
If, however, a donor requests that the University quote an
amount, it is appropriate to list the high and low selling prices
on the date of valuation or enclose a copy of a newspaper quota-
tion for that date.
Accounting for Securities
If the proceeds from the sale of securities are designated for
current use, the net proceeds are transferred to the campus
Accounting Office through a journal entry to the campus finan-
cial-control account. Information on the net proceeds may be
obtained from the campus Accounting Office. The net proceeds
will differ from the amount on the Treasurer's Gift Notice (TRS)
by the amount of the broker's commission, Securities Exchange
Commission charges, and the gain or loss on the sale of the
securities (see "Documenting Gifts of Securities" above).
When securities are held rather than sold, the campus is informed
of the value assigned to the securities through the TRS form
initiated by the Treasurer's Office (see "Documenting Gifts of
Securities" above). If the Treasurer is unable to sell a gift of
securities because no market exists for the item, no entry is
made into the campus accounting records and no expenditures may
be made against the gift. If securities are for an endowment,
their value will be recorded in an endowment fund at Corporate
Accounting, but not in the campus financial-control account.
Identification of the gift with the campus is accomplished by a
campus location code in the title of the General Ledger account.