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.

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. 

The S’cool

Long-time Dallas area residents may remember the Adult Education organization FunEd. It has been out of existence for several years, but the concept is back and better than ever. The S’Cool (pronounced The School) holds classes in several locations throughout the Metroplex. Join us at their Plano location, St. Andrew United Methodist Church, 5801 W. Plano Parkway, for two classes: Conduct Your Own Estate or Moving Sale and How to Buy at Auction and Estate Sales. For class dates and registration information, call 866-284-3726 or visit the website, www.thescool.com.