Charitable Contributions

Tips & Guides Newsletter

VALUE REVIEW™
Published by Semler Appraisals & Estate Liquidations
A Professional Service for the Valuation of Personal Property

Winter, 2005 Vol. 7, No. 1

Charitable Contributions

The deadline for tax filing is quickly approaching. If you made donations of non-cash personal property to qualifying charities last year, you may be entitled to a tax deduction. IRS Revenue Procedure 66-49 and Regulation Section 1.170A-13(c) (3) of 1988 cover the information required in appraisals for charitable contributions. IRS Publication 526 (Charitable Contributions) and IRS Publication 561 (Determining the Value of Donated Property) provide guidance for the taxpayer. Check with your professional tax advisor about your situation.

Donations for which deductions can be taken must have a “related use” to the qualifying charitable organization. A boat anchor donated to the sewing machine museum does not have a related use, but a painting or sculpture donated to an art museum does. The qualifying organization receiving the taxpayer’s non-cash contribution must have a mission that is “related” to the property being donated.

How much of a deduction can be taken? All deductions are made at fair market value (FMV), defined in Internal Revenue Regulation Section 1.17A-1(c)(2) as “The price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts.” If you donate clothing to the Salvation Army or Goodwill, the FMV is the price that their typical customers actually pay for clothing of similar age, condition, style and use. The amount you paid for the clothing has no relevance.

When the FMV of donated items is less than $5,000.00, an appraisal is not needed. While appraisals are required above $5,000.00, the appraisal itself does not have to be sent to the IRS unless the donation exceeds $20,000.00.

IRS Form 8283 is required for all non-cash donations above $500.00. The taxpayer (donor) and charitable organization (donee) complete various sections of the form. The appraiser’s involvement with 8283 comes into play when the FMV exceeds $5,000.00 (the level at which an appraisal is required). The appraiser’s signature is required on the form, acknowledging that the appraiser is qualified to make the appraisal; that the appraiser is not an excluded individual, i.e., the donor, donee, employed by or related to either party; that the appraiser understands the penalties for over-valuing the property; and that the fees charged for the appraisal were not based on a percentage of the value found.

Significant donations are reviewed by the IRS Commissioner’s Art Advisory Panel, a 25-member group of dealers, appraisers and museum directors. They can recommend acceptance or adjustment of the taxpayer’s claimed values. In an effort to resolve tax controversies as early as possible, the IRS instituted Revenue Procedure 96-15 (Post Contribution Pre Filing Procedure). This try-it-before-you-claim-it procedure pre-qualifies the taxpayer and can be used for non-cash contributions appraised at $50,000.00 or more.

FMV	Appraisal Required	Appraisal Sent to IRS	Taxpayer 8283	Appraiser 8283	Photo Required
$0-$500	No	No	No	No	No
$500-$5,000	No	No	Yes	No	No
$5,000+	Yes	No	Yes	Yes	No
$20,000+	Yes	Yes	Yes	Yes	Yes