Noncash Charitable Contributions
- Jun 8, 2022
Taxpayers are entitled to income tax deductions equal to the fair market value of their charitable contributions. While reporting cash contributions is simple, reporting noncash contributions can be much more difficult.
Taxpayers will sometimes choose to make noncash contributions of stock or other business interests, real property, artwork, intellectual property, or other forms of tangible or intangible property. A deduction for these types of charitable contributions is subject to numerous substantiation requirements.1 Often, taxpayers with good and charitable intentions lack the tax expertise needed to comply with the IRS’s substantiation requirements.
These requirements include the filing of Form 8283, Noncash Charitable Contributions, for noncash charitable contributions exceeding $500 in the aggregate. A separate Form 8283 is filed for each donee and each item of property.2
Section A of Form 8283 is used to report noncash donations under $5,000 or donations of publicly traded securities. If Section A is used, Form 8283 requests:
- Identification of the donee organization,
- Date of contribution,
- Fair market value of the contributed property on the date of donation and method of valuation,
- A sufficiently detailed description of the property (in the case of a public security, this must include the company name, number of shares, and type of security, including whether it is a share of a mutual fund), and
- In the case of contributions for an item greater than $500,
- the manner of acquisition and the approximate date of acquisition by the donor, and
- the cost or other adjusted basis of the property.
Section B of Form 8283 is used to report noncash donations exceeding $5,000. In addition to the above information, Section B also requests:
- a signed declaration by a qualified appraiser, and
- a signed acknowledgement by the donee organization.
A written qualified appraisal from a qualified appraiser is generally required for all donations reported on Section B of Form 8283.3 The appraisal must be attached to the Form 8283. A qualified appraisal must meet the following requirements:
- Signed and dated by a qualified appraiser not earlier than 60 days before the date of donation,
- Received by the taxpayer before the income tax return’s due date (including extensions),
- Include the appraiser’s credentials,
- Include a detailed analysis of the method of valuation, such that the Service can evaluate the claimed deduction and effectively handle the possibility of an overvaluation, and
- Include a statement that the appraisal was prepared for income tax purposes.
To assist in complying with these substantiation requirements, taxpayers should consider:
- Maintaining records throughout the year, documenting noncash contributions and related information;
- Coordinating efforts between the donee organization and the qualified appraiser so that both parties timely sign the Form 8283; and
- Ensuring donee acknowledgment letter and qualified appraisal are received before the due date for the income tax return.
1IRC Sec. 170(a)(1)
2A group of similar items, such as a coin collection, may be reported on the same Form 8283.
3Exceptions to this appraisal requirement include donations of a qualified vehicle under certain circumstances, intellectual property, and inventory/property held primarily for sale to customers in the ordinary course of business.
Our Current Issue: Q2 2022
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Kristen De Noia
Kristen De Noia is a Senior Tax Manager with tax compliance and planning experience focusing on personal and fiduciary income taxation, gift taxation and trusts and estates including high net worth families and closely held business owners.
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