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By Liza Horvath


Gifting Non-Cash Assets


As the year-end approaches, many begin to consider making last minute donations to a favorite charity and not only feeling the satisfaction from knowing we are supporting an organization we love, but also getting a beneficial tax deduction. The IRS has been more attentive to the gifts we make to charities and the resulting tax deductions claimed. What this means to you and I is that while we still want to benefit charity, we need to be sure that all the right steps are taken in order to comply with the strict IRS regulations regarding gifting. If we are not careful, the IRS could disqualify a gift and, while the charity will still keep the donation, we may not get to take a tax deduction for making the gift.


Making donations of cash and the required receipts or acknowledgements was covered in last week’s Senior Advocate. If you want to make non-cash contributions to charities like appreciated stock, art, land, antiques, wine or other tangible personal property, the documents to substantiate the gift are more detailed. If possible, consider gifting items that have appreciated significantly since you bought them – the charity can liquidate the gift or auction it off and avoid paying the capital gains taxes that you or I would have to pay if we sold the item ourselves.


Make sure, however, that when you make the gift you obtain the IRS required appraisal, receipt or acknowledgement. If your donation is valued at less than $250, you should obtain a receipt from the charitable organization that includes a description of the gift, the fair market value and how that value was determined, your cost basis (what you paid for it), and any conditions related to the donation of the item – “This gift is unrestricted,” or “This gift or its sales proceeds will be used by the MPC Art Department for the purchase of a 3-D printer.”


If your donation is valued at $500 or more, you will need to report how the property was acquired by you in addition to the items needed for the $250 donation. After stolen art was “gifted” to museums and the donors benefited from considerable tax deductions, the IRS understandably tightened the requirements regarding “proof” of ownership.


If the value of your gift exceeds $5,000, you must obtain a qualified appraisal unless the donation is publically traded stock. For instance, if you have an original Alexander Calder mobile that you want to donate to the Monterey Museum of Art, an appraisal must be done by an art appraiser who is knowledgeable about his work. The appraisal must include 15 specific items set forth in IRS regulations including the physical condition of the gift, the date of the contribution, a statement that the appraisal is being done for income tax purposes and the appraiser’s qualifications, among others. Failure to complete the appraisal properly will most likely result in the IRS disqualifying your deduction. Your tax advisor can help you meet the requirements set forth by the IRS regarding a qualified appraisal.


Even though studies have shown that most of us do not donate to charity for the tax deduction, getting a break from the IRS is always helpful. Just remember that certain rules apply to donations and defective paperwork can result in the loss of the charitable deduction. Check with your tax advisor and work with the charity – the development director of the charity can help guide your donation to best help the organization and our tax advisor will make sure you get a clean tax deduction on your 2014 income taxes.

Liza Horvath has over 30 years experience in the estate planning and trust fields and is the president of Monterey Trust Management, a financial and trust management company. This is not intended to be legal or tax advice. If you have a questions call (831)646-5262 or email liza@montereytrust.com










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