A stock donation takes two journal entries, one on each side of the gift. The donor debits contribution expense at the stock’s fair market value on the donation date, credits the investment off the books at its original cost basis, and records the difference as a gain (or a loss, if the shares have fallen). The nonprofit debits investments and credits contribution revenue for that same fair market value. Everything else in the journal entry to record a stock donation, on either set of books, is a variation on those two pairs of lines.
The Number Both Entries Turn On
Every figure in these entries flows from one number: the fair market value of the shares on the donation date. The IRS defines fair market value as the price a willing buyer and a willing seller would agree on, with neither under pressure and both reasonably informed.1Internal Revenue Service. Publication 561 (12/2025), Determining the Value of Donated Property
For shares listed on a major exchange, fair market value is the average of the highest and lowest quoted selling prices on the donation date. High of $52, low of $48, fair market value of $50.1Internal Revenue Service. Publication 561 (12/2025), Determining the Value of Donated Property For mutual fund shares, use the net asset value on the date the donor loses control of the shares.
The donation date itself depends on how the shares moved. Hand-delivered or mailed certificates take the date of delivery or mailing. Shares transferred broker-to-broker take the date the stock is actually transferred on the corporation’s or receiving broker’s books, not the date the order was placed.1Internal Revenue Service. Publication 561 (12/2025), Determining the Value of Donated Property A broker transfer can take several business days, and the price can drift in that window. Pin the date first, then price it.
Donor Entry: Appreciated Stock
This is the common case. A company owns 100 shares originally bought at $10 (cost basis $1,000). On the donation date the shares are worth $50 each, so the gift is worth $5,000. The entry has to do three things at once: expense the contribution at fair market value, remove the investment at cost, and pick up the appreciation as a gain.
- Debit Contribution Expense $5,000
- Credit Investment in Stock $1,000
- Credit Gain on Donation of Securities $4,000
The $4,000 gain lands on the donor’s income statement for book purposes, but it isn’t taxed. That’s the point of donating appreciated shares instead of selling them: sell the stock and donate the cash, and the $4,000 of appreciation is a taxable capital gain; donate the shares directly and the same $4,000 rides through as a book gain the IRS never touches, while the deduction is still taken at full fair market value if the stock is long-term capital gain property.2Internal Revenue Service. Publication 526 (2025), Charitable Contributions
If the shares were bought in multiple lots at different prices, specific identification lets the donor pick which lot goes. The lowest-basis lot produces the largest untaxed gain. Identify the specific shares before the transfer settles.
Donor Entry: Stock That Has Lost Value
Flip the numbers: 100 shares bought at $50 ($5,000 basis), now worth $30 each ($3,000 fair market value). The entry becomes:
- Debit Contribution Expense $3,000
- Debit Loss on Donation of Securities $2,000
- Credit Investment in Stock $5,000
The contribution expense caps at fair market value, the investment still leaves the books at full cost, and the shortfall goes to a loss account. Note what the donor loses here for tax purposes: the capital loss disappears. Donating depreciated stock directly forfeits it. In almost every case the better move is to sell the stock, claim the capital loss, and donate the cash. The charity nets the same amount, and the donor keeps both the charitable deduction and the loss. On the books that becomes two ordinary transactions (a sale and a cash contribution) instead of the combined entry above.
Nonprofit Entry: Receiving the Shares
The charity records the gift at the same fair market value the donor used, on the same donation date:
- Debit Investments $5,000
- Credit Contribution Revenue $5,000
Under nonprofit GAAP, contribution revenue is recognized immediately on an unconditional transfer. There’s no waiting until the stock is sold, and no picking up the donor’s cost basis. The books show what the shares are worth on the date they arrive.
The credit line splits by restriction. An unrestricted gift is credited to contribution revenue without donor restrictions. A gift the donor tied to a purpose (a scholarship program) or a time (an endowment locked up for five years) is credited to contribution revenue with donor restrictions. The debit to investments is the same either way.
Nonprofit Entry: Selling the Shares
Most charities sell donated stock quickly and treat the sale as its own transaction. Gain or loss is measured against the recorded value, which is the donation-date fair market value. The donor’s original cost basis is irrelevant on this side of the ledger.
Sale a week later at $5,100:
- Debit Cash $5,100
- Credit Investments $5,000
- Credit Gain on Sale of Investments $100
Sale at $4,950 instead:
- Debit Cash $4,950
- Debit Loss on Sale of Investments $50
- Credit Investments $5,000
Any price movement after the donation date belongs to the charity’s books alone. Many organizations sell donated securities within a day or two of receipt for exactly this reason: it limits market exposure and keeps the accounting clean.
Paperwork That Has to Travel With the Entries
The journal entries hold up only if the supporting documentation is there. On the donor side, any single charitable contribution of $250 or more requires a contemporaneous written acknowledgment from the charity, describing the property donated (not just “stock”) and stating whether any goods or services were provided in return.3Internal Revenue Service. Topic No. 506, Charitable Contributions “Contemporaneous” means in hand by the earlier of the filing date or the return’s due date.
Noncash contributions over $500 in total require Form 8283 with the return. For publicly traded securities, only Section A is required, at any dollar amount, and no qualified appraisal is needed.4Internal Revenue Service. Form 8283 (Rev. December 2025) That’s a real advantage over most other noncash gifts, where anything above $5,000 pulls in Section B and an appraisal.
On the charity side, if the nonprofit sells or otherwise disposes of donated property within three years of receipt, it must file Form 8282 (Donee Information Return) with the IRS within 125 days of the disposition.5Internal Revenue Service. Form 8282 – Donee Information Return Because most charities sell donated stock within days, this filing is triggered on nearly every stock gift. The form reports the receipt date, the disposition date, and the amount received, letting the IRS cross-check what the donor deducted.
A Note on Privately Held Shares
The mechanics above assume publicly traded stock. The journal entries for privately held shares look identical: contribution expense at fair market value, investment at cost, difference as a gain or loss on the donor’s side; investments and contribution revenue at fair market value on the nonprofit’s side. What changes is how that fair market value gets established.
Without quoted prices, valuation looks at the company’s net worth and earning power, the nature and history of the business, industry outlook, competitive position, the value of underlying assets including goodwill, and comparable valuations from similar businesses.1Internal Revenue Service. Publication 561 (12/2025), Determining the Value of Donated Property If the claimed deduction exceeds $5,000, the donor needs a qualified appraisal from a qualified appraiser and must complete Section B of Form 8283.6Internal Revenue Service. Instructions for Form 8283 The appraisal must be dated no earlier than 60 days before the donation and no later than the return’s due date. Keep the full appraisal along with the financial records and any accounting or engineering reports it relied on.