Donated stock is shares in a corporation that have been donated to a charitable entity. The donor can then take a tax deduction in the amount of the fair value of the stock on the date of donation, but only for shares that have been held for at least one year. The fair market value of the shares of a public company are easily determined; use the average of the high and low stock prices on the donation date. If the shares are those of a private company, either an appraisal is needed or a reasonable valuation method.
If shares have been held for less than one year, the deductible amount is the lower of the cost basis of the shares or their fair market value.
Shareholders have a monetary incentive to donate their stock, rather than selling the shares and then donating the resulting cash to a charity. The reason is that shareholders avoid paying the capital gains tax when they donate stock directly.