Donation to MVEF that Achieved 12x Giving Impact

Google Challenge Grant for MVEFMy 5 year old started kindergarten this year at a school that’s part of the Mountain View Whisman School district. All the parents are asked to make a donation to the Mountain View Educational Foundation. MVEF raises funds to support essential programs for all Mountain View students.  These programs include hands-on experimentation, team play, music, art, and sports for the students so that they receive a well-rounded education. With MVEF, schools don’t have to worry about programs falling victim to budget cuts.

Earlier last month, Google decided to partner with MVEF and offered a special one-time challenge grant to support Mountain View schools. Google will match all donations to MVEF up to $400,000 from August 1 through December 11, 2015. Furthermore, donations from first-time donors will be matched 2:1. That means that new parents can triple the impact of their donation!

$1 donation + $2 Google match = $3 for the schools!

In addition, if parents work for companies that offer corporate match, then the impact will be quadrupled!

$1 donation + $2 Google match + $1 company match = $4 for the schools!

But wait. It doesn’t stop here. I’m going to demonstrate how I was able to stretch that impact even more. And I mean A LOT more!

($1 donation + $2 Google match + $1 company match) x “The FPT (5+2) Model” = ???

The original “Five Plus Two”

Donor Advised Funds ChartFPT Gift Box is all about “The FPT (5+2) Model” – that is turning limited resources into abundance! Matter of fact, long before I decided to set up FPT Gift Box as a business and a social enterprise, I had the idea of starting a non-profit called “Five Plus Two.” The original idea was to teach people how to maximize their charitable contributions and impact via donor-advised funds (DAF). I’ve abandoned that project for several reasons which I won’t go into here, but the concept of “Five Plus Two” is still the same which I carried over to FPT Gift Box. My main focus is still how to turn 5+2 into a significantly larger number than 7!

What is a donor-advised fund (DAF)?

You can read the Wikipedia entry on what a DAF is, but here’s how it works: Instead of giving cash or writing a check to a charitable organization, you use an investment vehicle called a donor-advised fund (DAF) to funnel all your contributions and donations to charities. You can open a DAF with brokerages like Charles Schwab and Fidelity, then donate your financial assets (e.g., stocks, mutual funds, stock options, etc.) with the lowest cost basis (i.e., investments with the highest capital gains) to the account. The DAF fund managers then liquidate and reinvest your funds to dedicated funds that are less risky but still have growth. So while your DAF grows in value over time, tax free, averaging about 5% a year, you can issue grants to any charity operated under 501(c)(3) anytime in any amount.

Benefits to donating via a DFA:

  • Immediate tax write off without donating anything to a charity (e.g., contribute to the DFA in December and receive tax refund for the full amount the following April).
  • No capital gains tax on your contributions nor the growth of the DAF over time.
  • Issue grants to any organization operated under section 501(c)(3).
  • Send anonymous donations so that the receiving organizations don’t have access to your personal information (and thus won’t spam your mailbox or call you to solicit more donations).
  • Simpler tax filing since you only have to include contributions to the DAF instead of tracking all donations to charities.
  • … and many more.

Example: Writing a check vs. donating stocks to a DAF

Let’s say 5 years ago, you bought 10 shares of Google stocks at $300 per share. Today, the stock price is $733. Let’s compare the difference between writing a check vs. donating stocks to a DAF.

Sell the stocks and write a check Donate the stocks to a DAF
Value of stocks (as of Nov 6) 10 x $ 733 = $7,330 10 x $ 733 = $7,330
Original cost basis 10 x $300 = $3,000 10 x $300 = $3,000
LT capital gain $7,300 – $3,00 = $4,300 N/A
LT capital gains tax @ 15% $4,300 x 0.15 = $650 N/A
Donation Amount $7,330 – $650 = $6,680 $7,330
Tax write off $6,680 $7,330
Tax refund @ 25% tax bracket $6,680 x 0.25 = $1,670 $7,330 x 0.25 = $1,833
Adjusted cost basis
(Original cost basis – Tax refund)
$3,000 – $1,670 = $1,330 $3,000 – $1,833 = $1,167
Giving impact
(Donation / Adjusted cost basis)
$6,680 / $1,330 = 5x $7,330 / $1,167 = 6.3x

Google StockSo from this very simplified example, it is evident that donating those Google stocks to a DAF will have a greater giving impact due to the tax savings from not having to pay any capital gains tax.

Furthermore, if you don’t make an immediate donation to a charity and instead, disburse those funds over, say, 5 years, averaging 5% annual compound growth (conservatively), you could potentially have an additional $2,000 to donate! Your impact would be even greater (8x+) while your adjusted cost basis remains the same.

In addition, if you work for a company that offers corporate match, you’re looking at doubling that to 16x+ impact!!

Just think about that for a moment.

$1 donation = $16 to charity!

Now, we’re getting closer to how Jesus fed 5,000 people with 5 loaves of bread and 2 fish!

5 + 2 = 5,000

Maximizing our giving impact to MVEF

Coming back to the Mountain View Educational Foundation (MVEF) and Google’s Challenge Grant.  What happens when you apply the FPT giving model to the equation?

($1 donation + $2 Google match + $1 company match) x “The FPT (5+2) Model” = ???

Two weeks ago, I issued a $1,000 grant from a donor-advised fund to MVEF. Over the years, my husband and I have been contributing to this DAF with investments that had the highest capital gain. The fund issued for this grant was from a mutual fund that had about 60% capital gain over 3 years (purchased in 2012) and donated to the DAF in 2014 which grew another 12% since then.

So reversing the math, we have:

  • Grant to MVEF from DAF: $1,000
  • Original value of contribution from 1.5 years ago (without the 12% growth): $1,000 / 1.12 = $893
  • Original cost basis of contribution (without the 60% capital gain): $893 / 1.6 = $558

Here’s the full story in chronological order (simplified to illustrate the math behind the FPT giving model):
Exponential growth

  1. In 2012, I invested $558 in a mutual fund.
  2. In 2014, that mutual fund grew 60% and was worth $893 when I donated the mutual fund to a DAF.
  3. In April 2015, I filed our taxes, had a tax write off of $893 and received $223 in tax refund (25% tax bracket). Our adjusted cost basis is now $335 (original cost basis – tax refund).
  4. By Nov 2015, the $893 in the DAF grew 12% and was valued at $1,000 when I issued a $1,000 grant to MVEF.
  5. Google matched the donation 2:1 and donated $2,000 to MVEF.
  6. I requested corporate match from my employer. MVEF received another $1,000.

MVEF received $4,000 in donations that only cost us $335 → That’s a giving impact of almost 12x!!

Here’s an even simpler equation:

($1 donation + Google match + company match) x “The FPT (5+2) Model” = $12 for the schools

That’s what “The FPT (5+2) Model” is all about – turning limited resources into abundance and blessings!

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