Consider this scenario: a longtime supporter writes to offer your organization her late father’s rental duplex. The development office sees the year’s largest single contribution; the finance office sees property taxes, deferred maintenance, insurance premiums, and a tenant with eleven months remaining on a lease. Both views might be correct, but there’s a tension between them. Charitable generosity is a gift-horse worth examining, because some assets carry costs, obligations, and legal consequences that a check never would. When an organization accepts the wrong asset, it can pour months of staff time and unbudgeted funds into managing property it never wanted, and in some cases it takes on a tax bill along with the deed. The tool that prevents this outcome is a nonprofit gift acceptance policy, and it’s generally smart for charities have one.
Liquid and illiquid gifts are not the same asset
Some gifts turn into money easily, while others do not; that’s the difference between liquid and illiquid assets. Cash and publicly traded securities (meaning stock you can sell on an open exchange) can be valued in minutes and put to work almost as fast. Nearly every other kind of property takes more effort: the illiquid category includes real estate, interests in closely held companies and LLCs, cryptocurrency, vehicles, artwork and other physical items, paid-up life insurance, and the other assorted things that reach a charity through a will or estate. Many of these gifts are truly valuable, but the difficulty is that an illiquid asset can sit on an organization’s books for months while it arranges a sale—and a duplex cannot meet payroll.
Interests in privately held businesses deserve particular caution. When a donor offers shares in a small corporation or a membership interest in an LLC, the company’s operating agreement comes attached to the gift and can tie your hands. That agreement might require the other owners to approve any transfer, give them the first right to buy the interest, forbid a sale to any outsider, or handle the question so poorly that you’re left guessing. Even when your organization is free to sell, a minority stake in a company that no outside buyer wants to control very well may turn out to be unsellable. That kind of stake often gives you no power to force the company to pay you anything, and some agreements also let the company issue a capital call, meaning it can ask its owners for more money, which can turn an apparent gift into a bill. Valuation makes selling harder still, because a private company has no public price tag, so a professional has to estimate its worth.
Separately, the tax rules add another layer of complexity. A donor who wants to deduct noncash property worth more than $5,000 generally has to get a professional appraisal and complete Section B of IRS Form 8283, and your organization, as the recipient, signs Part V to confirm it received the property. A higher $10,000 threshold applies to gifts of stock in a private company.
If your organization sells or otherwise dispose of the property within three years of receiving it, you have to report that to the IRS on Form 8282 within 125 days of the disposition and give the donor a copy, with narrow exceptions for items worth $500 or less and property you give away for charitable purposes. Your annual 990 return reaches the same subject from another angle: a charity that takes in more than $25,000 in total noncash gifts—or any gift of art, historical treasures, or conservation property—has to file Schedule M with its Form 990 and list those gifts by type.
The liabilities that travel with an asset
Beyond liquidity, another serious risk to consider with unconventional gifts is that they could bring liabilities with them. Donated real estate is one example: a building might run up property taxes, insurance, routine maintenance, and association dues, and every one of those bills lands on your organization’s budget while you look for a buyer. Land can carry even more serious concerns. If a parcel is contaminated (say from leftover pollution from an old gas station or dry cleaner), the responsibility to clean it up can follow the property to your organization, and the price of accepting “free” land can climb into six figures. Hidden liens and unresolved boundary disputes pass to your organization the same way.
The tax consequences are harder to see but worth a close look. Think back to that interest in a private business: if the company runs an active trade or business, its earnings can flow through to your organization and be taxed as unrelated business income (UBTI), meaning income the IRS can tax even though you are a nonprofit, because it is unrelated to your mission. That produces both a filing duty and a tax bill on a gift you assumed was free money.
Real estate donated to your organization with a mortgage still on it raises a similar problem under the debt-financed property rules of Internal Revenue Code Section 514, which can tax the income from mortgaged, income-producing property as unrelated business income. The Code offers relief in two narrow cases. Property you receive through a will is not treated as carrying that mortgage debt for ten years, and property you receive as a lifetime gift gets the same ten-year grace period when the mortgage was placed on it more than five years before the gift and the donor owned it for more than five years, as long as your organization does not take over the debt or pay the donor for their equity. While these exceptions are useful, they also are easy to lose.
Last, organizations should consider where the asset or the money behind it came from. A gift tied to a donor whose reputation is under a cloud can cost you goodwill you built over many years, and no appraised value makes that trade worth it. Process problems are the biggest contributor to reputational harms like this: a staff member accepts a generous offer on the spot, the board is never asked, and the organization finds out later that it holds something at odds with its mission or its appetite for risk. Most of these issues can be avoided by asking the right questions at the onset, and a nonprofit gift acceptance policy often is the tool to prompt those questions.
The nonprofit gift acceptance policy as a triage instrument
The fix is a single governing document, and it does not have to be long: a gift acceptance policy. It effectively sorts incoming gifts by how much review each one needs. Easy gifts, like cash and publicly traded securities, generally should move through without ceremony. A middle group covers gifts that deserve a second look before you commit, which a designated officer or a small gift acceptance committee can handle. The top group is reserved for gifts that should not move without review by counsel and board; this category usually includes real estate and private business interests, and extends to any gift big or unusual enough to change your organization’s risk picture.
A solid policy will assign these responsibilities to specific persons at your organization. Specifically, it should say who reviews a complex gift, who has the authority to turn one down, who signs the receipt for the donor, and who manages the relationship when the answer to proposed gift is “no, thank you.” It also typically will spell out the steps required before those top-tier gifts are accepted. For real estate, that generally means an appraisal and a title and lien search, which is a check for unpaid debts or legal claims against the property, plus an environmental review when the land calls for one. For a business interest, it means reading the operating agreement before you agree to the gift. For anything large or out of the ordinary, it includes asking where the asset came from. A short checklist at this stage keeps your development team from having to make hard calls under pressure while a donor waits for a reply.
This structure also has external benefits. Schedule M of the 990 asks whether your organization has a gift acceptance policy that requires review of nonstandard contributions. The form describes a nonstandard contribution as one you cannot reasonably expect to use for your mission, that has no ready market where you could sell it, and whose value is speculative or hard to pin down. A charity that can answer yes signals sound governance to regulators, funders, and anyone who reads its return. The board adopts the policy, the gift acceptance committee evaluates the hard cases, and finance staff records every noncash gift so the numbers are ready when Schedule M is due. The policy is internally beneficial too because it protects your staff. When a development officer has to decline the timeshare or the classic car that no one will buy, “our policy requires board review for gifts like this” is a far kinder answer than a personal no, and it keeps the donor relationship intact.
Where to start
A sound gift acceptance policy gives your organization the freedom to be selective, so the gifts you keep are the ones that move your mission forward, and the gifts that would cost more than they return get a gracious decline.
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Every hour spent managing an unwanted duplex is an hour taken away from the work your donors meant to support, and careful stewardship of your assets is one of the most direct ways you protect the mission itself. If your organization needs a starting framework, 501(c)onfident™ (arriving fall 2026!) offers a DIY gift acceptance policy template that you can adapt to your organization. You can join the list to be notified first about special offers.
And when a complex gift arrives (sometimes with an operating agreement or a deed) and you need 1:1 legal support, we can work together through Porter Legal to review it before you commit and help your board build a policy that answers the hard questions in advance, so the next unexpected offer feels like a decision you’re ready to make. Reach out to set up an initial conversation.
