$500, $5K, $20K, $500K
(by Dave Maloney) This is Post 3 of 3. It, along with two additional posts, will address when qualified appraisals are required, when they must be attached to the taxpayer’s return, and related issues. See Post 1 of 3. See Post 2 of 3.
Let’s review IRS requirements regarding non-cash charitable donations at various value points, and associated appraisal-related issues.
My two primary references are IRS Pub 561 http://www.irs.gov/pub/irs-pdf/p561.pdf (Determining the Value of Donated Property) and IRS Pub 526 http://www.irs.gov/pub/irs-pdf/p526.pdf (Charitable Contributions). Get copies of these for your library and keep them updated. BTW, did you know that there is a new (2012 version) IRS Form 8283? Check it out: http://www.irs.gov/pub/irs-pdf/f8283.pdf.
1. Donated items valued at less than $500 are claimed on the taxpayer’s Schedule A (Itemized Deductions) and do not require a qualified appraisal by a qualified appraiser. Clothing and household items (which are defined as furniture, furniture, electronics, appliances, linens and other similar items but excluding food, paintings, antiques, and other objects of art, jewelry and gems, and collections (ref: Pension Protection Act of 2006 Section 1216: http://www.gpo.gov/fdsys/pkg/PLAW-109publ280/pdf/PLAW-109publ280.pdf)) must be in good condition or better.
2. Donated items valued between $500 and $5000 are reported by the taxpayer on IRS Form 8283, Secion A and NORMALLY do not require a qualified appraisal or the services of a qualified appraiser. See next paragraph, 2a, for exception.
2a. As a result of the (Pension Protection Act of 2006 Section 1216: http://www.gpo.gov/fdsys/pkg/PLAW-109publ280/pdf/PLAW-109publ280.pdf (see page 301)) clothing and household items “in less than good condition” and valued in excess of $500 now require a qualified appraisal by an qualified appraiser. In addition, for such a donation the qualified appraisal must be attached to the return, and the taxpayer must complete Section A or B (depending on the claimed amount) of Form 8283. If using Section B (i.e., claimed amount exceeds $5000), the appraiser must sign.
3. Donated items valued in excess of $5000 require a qualified appraisal by a qualified appraiser. The taxpayer must complete Section B of IRS Form 8283 which the appraiser must sign.
4. For items valued between $5000 and $20,000, the appraisal need not be attached to the return, but the taxpayer needs to submit Section B of Form 8283 which the appraiser must sign.
5. For donated items valued in excess of $20,000 and which are considered to be “Paintings, Antiques and Other Objects of Art” (from IRS Form 8283: “Art includes paintings, sculptures, watercolors, prints, drawings, ceramics, antiques, decorative arts, textiles, carpets, silver, rare manuscripts, historical memorabilia, and other similar objects.”) a copy of the qualified appraisal by a qualified appraiser must be attached to the taxpayer’s return. If NOT considered “Paintings, Antiques and Other Objects of Art”, the appraisal report need not be attached, but the taxpayer does need to submit Section B of Form 8283 which the appraiser must sign.
5a. Note that the IRS regulations also address “collectibles.” IRS Form 8283 defines collectibles to include “coins, stamps, books, gems, jewelry, sports memorabilia, dolls, etc., but not art as defined above”.
6. For any donation in which the claimed deduction exceeds $500,000 (either “art” or non-art), a copy of the appraisal report must be attached and the taxpayer needs to submit Section B of Form 8283 which the appraiser must sign.
A. The IRS provides guidance relating to object identification and disclosing comparable market data for donation appraisals of art valued in excess of $50,000. Be familiar with this. I suggest that you use this guidance for all donation appraisals in excess of $5,000 and not only those in excess of $50,000. (www.irs.gov/pub/irs-utl/appraisal_item_format.pdf)
B. The IRS also provides guidance regarding photographs which are required to submitted by the taxpayer for items exceeding $20,000 (http://www.irs.gov/pub/irs-utl/art_appraisal_services_photographic_requirements.pdf). While it is, of course, the taxpayer’s responsibility to submit photographs, it does not hurt for you to be knowledgeable about this related guidance.
© David J. Maloney, Jr. 2013