Charitable Contribution

Charitable Contribution

When contemplating the charitable contribution of an object to a qualified non-profit institution or organization for an income tax deduction, your first step is to make certain that the institution or charity of your choice is willing and able to accept your gift. Our office can assist you with locating an appropriate 501(c)(3) organization.

A Contemporaneous Written Acknowledgement or Deed of Gift signed by both the donor and donee is required by the IRS, stating, among other things, whether any goods or services have been received in exchange for the donation, and if so, what those goods or services are. (Pub. 1771 or CFR 1.170A-13(f)) Additionally, the IRS states that if an item has been donated for a purpose other than a use related to the mission statement of the organization, you may be limited to a tax deduction of the Cost Basis or Fair Market Value, whichever is less; if there is a restriction on the donation (such as display/use requirements or limit on the future sale of the property, etc.) then the amount of the tax deduction must reflect the decrease in value resulting from these restrictions. (Pub. 561 and 26 CFR §170(e)(1)(B))

The IRS has a very specific list of requirements for a “qualified appraisal” and a “qualified appraiser.” A qualified appraiser must have verifiable education and experience in valuing the type of property for which the appraisal is performed by completing college-level coursework and having two or more years of experience in valuing the type of property at issue, or have earned a recognized appraiser designation for the type of property at issue. A qualified appraiser also cannot be the donor, the donee, a party to the transaction in which the donor acquired the property, employed by or related to any of the foregoing persons, or married to any person who is related to any of the foregoing persons. For more information, please see IRS Publication 561, page 4 of IRS Notice 2006-96 (PDF), “Guidance Regarding Appraisal Requirements for Noncash Charitable Contributions” and Revenue Bulletin 2018-33.

The IRS definition of Fair Market Value for Charitable Contribution can be found here: 26 CFR §1.170A-1(c)(2).

The IRS’s preferred format for items valued for $50,000.00 and above is located here: “Preferred Object Identification for Art Valued Over $50,000