Introducing stock donations on Frec

If you give to charity, the most tax-efficient gift usually isn’t cash. It’s stock that has grown in value. Because the shares are donated rather than you selling them, capital gains tax isn’t triggered on the growth. And if you’ve held them for more than a year and you itemize during your tax return, you can generally deduct their full market value. Wealth managers have used this strategy for their clients. Starting today, it’s built into Frec, so every investor can put it to work.

You can now donate appreciated stock straight from your direct index or self-managed holdings to any donor-advised fund (DAF) provider, letting you claim the tax deduction now and support causes on your own timeline.

Giving from a direct index, with an added tax benefit

Direct indexing is designed to hold the individual stocks in an index, rather than holding an ETF that tracks the same index. When a stock falls below what you paid for it, it’s automatically sold to harvest a capital loss that can offset gains elsewhere, and the proceeds are reinvested. Over time, your portfolio can accumulate appreciated shares, and opportunities to harvest additional losses may become less frequent.

For investors who give to charity, that makes a direct index a natural source of appreciated stock to donate. But donating individual stocks can throw your portfolio’s tracking of the index off balance, and rebalancing may require selling shares, potentially triggering capital gains taxes.

We built stock donations on Frec to solve that. When you donate from your direct index, you start by adding the cash you’d otherwise have given directly to charity. Frec donates shares worth as close as possible to that dollar amount, starting with your most appreciated long-term lots, to your DAF and uses your cash to buy fresh shares, helping keep your portfolio tracking the index without selling other stocks. Those new shares, bought at current prices, can give your direct index more opportunities to harvest losses in future years. That’s in addition to the tax benefits you already get from donating the appreciated shares.

In our simulations of a $1 million S&P 500 portfolio making nine annual gifts of $50,000 over 10 years, this added about 0.27% a year in extra tax alpha (the tax value of additional losses harvested) for Classic portfolios, 0.32% for 140/40 Long short and 0.41% for 250/150 Long short at federal tax rates, on top of the tax alpha direct indexing may already provide.

How it works

You decide how much to give. Frec handles the rest.

1. Click Transfer, choose Donate and select your direct index.
2. Open a DAF through Daffy or link an existing one.
3. Choose an amount. We show you the most you can donate from eligible shares.
4. Add the same amount in cash by bank transfer (ACH), wire, cash already on Frec or your portfolio line of credit¹.
5. Review the estimate. Frec identifies your most appreciated lots held more than a year and shows the estimated shares, their value and the estimated capital gains you won’t pay tax on. If those shares back your portfolio line of credit, we’ll flag any margin call risk.
6. Submit your DAF donation. When your cash arrives, Frec sends the shares to your DAF and invests your cash back into your index.

What it looks like

Here’s a hypothetical example. Say you plan to give $50,000 to the causes you care about this year. Instead of writing a check, you donate $50,000 of shares with a $15,000 cost basis, and add $50,000 in cash to your index.

Your DAF receives about $50,000 in shares, and you can support the charities you choose on your own timeline. If you itemize, you can generally deduct the full market value on the day your DAF receives the shares, just as you would with a cash gift. Gifts of stock are subject to a 30%-of-AGI limit and the new 0.5% floor, which The investor’s guide to donor-advised funds explains in more detail. And you don’t pay capital gains tax on the $35,000 gain. Selling would have cost $6,580 in federal tax at the 15% rate plus the 3.8% net investment income tax, or about $8,330 at the 20% rate.

Your cash goes back into your index, helping keep it closely aligned with its benchmark while reducing the need to sell other positions to rebalance. Your index also now holds $50,000 of new shares at current prices. If any of them fall below what you paid, Frec can harvest those losses to offset gains in future years. The same generosity, with potentially less lost to taxes.

To see how this adds up over time, we simulated a $1 million S&P 500 direct index making nine annual gifts of $10,000 to $50,000 over 10 years. Compared with giving the same amounts in cash, donating shares and adding cash increased estimated tax alpha in every strategy:

Strategy	Estimated added tax alpha (per year)
Classic	0.08% to 0.27% a year
140/40 Long short	0.08% to 0.32% a year
250/150 Long short	0.10% to 0.41% a year

Larger gifts produced bigger estimated gains in every strategy, and the 250/150 portfolio benefited most, because it holds the most long lots that can be refreshed and harvested later. Read the full results and methodology in our whitepaper.

Giving from your self-managed holdings

From your self-managed holdings, you can choose the exact lots to give. Only lots held more than a year are shown, so every share is generally eligible for a full market value deduction, if you itemize, subject to the usual limits. There’s no cash to add, and it’s a thoughtful way to trim a concentrated position while supporting the causes that matter to you.

Integrated with Daffy

With our integration, you can open a new Daffy account or link your existing one without leaving the donation flow. Donations to Daffy have no transfer fee. Once your shares arrive, you can recommend grants to almost any US public charity, from your local food bank to your child’s school, whenever you’re ready.

Daffy is a modern giving platform that has grown into one of the 10 largest DAF providers in the US². Like Frec, Daffy believes in making sophisticated financial tools accessible to everyone through great technology and thoughtful design. Daffy brings this philosophy to charitable giving with innovative features like Daffy for Families, Custom Portfolios, Custom Liquidation for Private Stock, and a mobile app.

DAF providers charge fees in different ways. Many large providers charge an annual administrative fee based on a percentage of your balance. Daffy charges a flat monthly membership fee, with tiers based on how much you contribute each year and which features you use. Which structure costs less depends on your balance and how much you contribute, so check each provider’s fee schedule.

Already have a DAF with another provider? You can link it to Frec when you donate by entering your DAF account details.

Getting started

For your gift to count toward 2026, your DAF must receive your contribution by December 31. Transfers take time, so we recommend starting early, and no later than December 15. December 15 is a recommendation, not a guarantee, and transfers to providers other than Daffy can take longer.

To start giving, click Transfer, choose Donate and select your direct index or self-managed account.

All simulation results mentioned in this article are hypothetical, do not reflect actual investment results, and are not a guarantee of future results.