Tax deductions

Non-monetary charitable contributions Tax deductions

Taxpayers are entitled to income tax deductions equal to the fair market value of their charitable contributions. While reporting cash contributions is simple, reporting non-cash contributions can be much more difficult.

Taxpayers sometimes choose to make non-monetary contributions in the form of stocks or other business interests, real estate, works of art, 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 intentions and benevolence do not have the tax expertise necessary to comply with IRS justification requirements.

Reporting requirements

Form 8283

These requirements include filing Form 8283, Non-monetary Charitable Contributions, for non-monetary charitable contributions exceeding $500 in total. A separate Form 8283 is filed for each donee and property.2

Section A of Form 8283 is used to report non-monetary donations less than $5,000 or gifts of publicly traded securities. If Section A is used, Form 8283 requests:

  • Identification of the recipient organization,
  • contribution date,
  • Fair market value of the property contributed on the date of the donation and method of valuation,
  • A sufficiently detailed description of the ownership (in the case of a public security, this should include the name of the company, the number of shares and the type of security, including whether it is a public share). a mutual fund), and
  • In the case of contributions for an item over $500,
    • the mode 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 non-monetary donations over $5,000. In addition to the information above, Section B also asks:

  • a statement signed by a qualified appraiser, and
  • a certificate signed by the recipient organization.

Evaluation

A written qualified appraisal from a qualified appraiser is generally required for all donations reported in Section B of Form 8283.3 The appraisal must be attached to Form 8283. A qualified appraisal must meet the following requirements:

  • Signed and dated by a qualified appraiser no earlier than 60 days prior to the date of donation,
  • Received by the taxpayer before the tax return due date (including extensions),
  • Include the assessor’s references,
  • Include a detailed analysis of the valuation method, so that the Service can assess the claimed deduction and effectively manage the possibility of an overstatement, and
  • Include a statement that the appraisal was prepared for income tax purposes.

Best Practices

To help comply with these substantiation requirements, taxpayers should consider:

  • Maintain records throughout the year, documenting non-monetary contributions and related information;
  • Coordinate efforts between the recipient organization and the qualified appraiser so that both parties sign the form 8283 in a timely manner; and
  • Ensure that the donee’s acknowledgment letter and qualified appraisal are received by the tax return due date.

1IRCSec. 170(a)(1)
2A group of similar items, such as a collection of coins, can be declared on the same Form 8283.
3Exceptions to this valuation requirement include donations of a qualifying vehicle in certain circumstances, intellectual property, and inventory/goods held primarily for sale to customers in the ordinary course of business.


Our current issue: Q2 2022