176 lines
7.3 KiB
Plaintext
176 lines
7.3 KiB
Plaintext
|
||
Regarding Charitable Contributions of Property other than Cash or
|
||
Stock
|
||
|
||
THE FOLLOWING summary of the U.S. tax laws concerning charitable
|
||
contributions was recently commissioned by the Caliph. It was prepared
|
||
by a qualified C.P.A. in New York, who was asked to elucidate the
|
||
subject without bogging down in technical references and jargon -- in
|
||
this he succeeded pretty well. Its publication here cannot serve in
|
||
place of counsel of ones' own tax accountant or attorney, but is
|
||
nevertheless a useful guide to how to help the Order without
|
||
unnecessary sacrifice. -- Ed.
|
||
|
||
Individual's Charitable Contributions
|
||
|
||
An individual is allowed a deduction from his gross income for
|
||
contributions to or for thed use of a charitable, religious,
|
||
educational, public or scientific organization or the United States or
|
||
other governmental unit specified. To be deductible the gift must be
|
||
made by the taxpayer. There is a deduction ceiling on an individual's
|
||
contributions.
|
||
|
||
The maximum deduction for gifts is 50% of adjusted gross income for
|
||
contributions to (but not for the use of) most public charities and
|
||
even some private foundations.
|
||
|
||
Substantiating Charitable Contributions
|
||
|
||
Certain information must be furnished in the income tax return to
|
||
support a deduction for contributions.
|
||
|
||
A corporate or individual taxpayer making a charitable contribution
|
||
of money must keep a cancelled check or a receipt or, in the absence
|
||
of a cancelled check or receipt, other reliable written records
|
||
showing the name of the donee, the date of the contribution, and the
|
||
amount of the contribution. A letter or other communication from the
|
||
donee acknowledging receipt of the contribution and showing the date
|
||
and amount of the contribution constitutes a receipt. The regulations
|
||
indicated that this information may have to be reported on a
|
||
taxpayer's return where required.
|
||
|
||
The regulations also require a corporate or individual taxpayer
|
||
making a charitable contribution of property other than money to have
|
||
a receipt from the donee charitable organization and a reliable
|
||
written record of specified information with respect to the donated
|
||
property. The receipt must include the name of the donee, the date and
|
||
location of the contribution, and a description of the property in
|
||
detail reasonable under the circumstances, including the value of the
|
||
property, in cases where it is impractical to obtain a receipt (such
|
||
as leaving property at charity's unattended drop site), the taxpayer
|
||
is nevertheless required to maintain a reliable written record of
|
||
specified information with respect to each item of donated property.
|
||
|
||
A reliable written record should include the following information:
|
||
|
||
1. name and address of the donee organization.
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
2. date and location of the contribution,
|
||
|
||
2. a description of the property in reasonable detail, including the
|
||
value of the property at the time the contribution was made, method
|
||
used to determine that value and a signed copy of any appraisal
|
||
obtained,
|
||
|
||
2. in the case of ordinary income property, the cost or basis of the
|
||
property,
|
||
|
||
2. if less than the entire interest in the property is contributed,
|
||
the total amount claimed as a deduction for the tax year and for prior
|
||
years and the name of any person other than the donee organizaiton
|
||
that has actual possession of the property,
|
||
|
||
2. The terms of any agreement entered into by the taxpayer relating to
|
||
the use, sale, or other disposition of the contributed property.
|
||
|
||
Moreover, where a taxpayer claims a charitable contribution
|
||
deduction in excess of $500 with respect to property, the taxpayer
|
||
must also maintain a written record as to (1) the manner of
|
||
acquisition (e.g., by purchase) and the approximate date of purchase
|
||
or manufacture and (2) the cost or other basis of property held less
|
||
than six months and, where available, similar information for property
|
||
held six months or more.
|
||
|
||
Contributions of Property
|
||
|
||
Generally, the deduction for gifts of property is measured by the fair
|
||
market value, which is defined 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.
|
||
|
||
However, limitations apply to the contribution of appreciated
|
||
property, and the amount of the deduction may be subject to reduction.
|
||
Whether there is a reduction, and how much of a reduction there is,
|
||
depends on the type of property donated (ordinary income or capital
|
||
gain property), the donee of the property, and the use to which the
|
||
property is put.
|
||
|
||
Fair Market Value
|
||
|
||
The income tax regulations dealing with charitable contributions jare
|
||
silent as to whether property must be valued on a bulk or an
|
||
individual basis and as to the market that should be used. Where these
|
||
issues arose, the Tax Court looked to the federal estate and gift tax
|
||
regulations. Those regulations indicate that the fair market value is
|
||
to be determined by the sale price of the item in the market in which
|
||
such an item is most commonly sold to the public.
|
||
|
||
Appraisals
|
||
|
||
Temporary regulations have been issued that apply to contributions of
|
||
property and publicly traded securities if the aggregate claimed or
|
||
reported value of such items of property (and all similar items of
|
||
property for which deductions for charitable deductions are claimed or
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
reported by the same donor for the same taxable year whether or not
|
||
donated to the same donee) is in excess of $5,000. The temporary
|
||
regulations apply to deductions claimed by an individual, closely held
|
||
corporation, or personal service corporation for charitable
|
||
contributions of such property made after 1984.
|
||
|
||
To substantiate such a contribution, the donor must obtain a
|
||
qualified appraisal and attach an appraisal summary to the return on
|
||
which a deduction for such contribution is first claimed, in addition
|
||
to complying with the general substantiation requirements. In the case
|
||
of nonpublicly traded stock, the claimed value of which exceeds $5,000
|
||
but does not exceed $10,000, the donor does not have to obtain a
|
||
qualified appraisal and can file an abbreviated appraisal summary.
|
||
|
||
A qualified appraisal is an appraisal document that:
|
||
|
||
1. relates to an appraisal that is made not earlier than 60 days prior
|
||
to the date of contribution of the appraised property;
|
||
|
||
2. is prepared, signed and dated by a qualified appraiser;
|
||
|
||
2. does not involve a prohibited type of appraiser fee, such as when a
|
||
part or all of the fee arrangement is based on a percentage (or set of
|
||
percentages) of the appraised value of the property (except for
|
||
certain fee arrangements with not-for-profit associations that
|
||
regulate appraisers, and
|
||
|
||
2. includes the following information:
|
||
|
||
a) a description of the property,
|
||
|
||
a) in the case of a tangible property, the physical condition of the
|
||
property,
|
||
|
||
a) the date of contribution,
|
||
|
||
a) the terms of any agreement entered into by the donor which relates
|
||
to the use, sale or other disposition of the contributed property,
|
||
|
||
a) the name, address, and taxpayer identification number of the
|
||
qualified appriasier and the appraiser's employer or partnership.
|
||
|
||
Value of an article may be substantially higher than the amount or
|
||
amounts received by the charity, and a deduction can be claimed for
|
||
the higher value. In such cases, an appraisal may be in order.
|
||
|
||
|