documenting charitable gifts

Documenting Charitable

Contributions

Russell James, J.D., Ph.D., CFP®

ProfessorTexas Tech University

Documenting Charitable

ContributionsPart I: Introduction

If I hit the target

and actuallydeduct the right amount,

isdocumentation

really a bigdeal?

Donor gives $80,000 of non-publicly traded stock ($3,700 basis) to charity. The required qualified appraisal is NOT completed, but the valuation is correct.

Result?

See Hewitt v. Commissioner, 109 T.C. 258 (1997)

Deduction reduced to

$3,700

Donor gives $80,000 of non-publicly traded stock ($3,700 basis) to charity. The required qualified appraisal is NOT completed, but the valuation is correct.

Result?

Donor gives $435,000 of equipment to public charity, but appraisal reports and receipts omit required information.

Later, to prepare for the audit, donor gets qualified appraisals. Result?

No deduction+ 20% penalty for underpayment of taxes

See Friedman v. Commissioner, T.C. Memo 2010-45

Donor gives $435,000 of equipment to public charity, but appraisal reports and receipts omit required information. Later, to prepare for the audit, donor gets qualified appraisals. Result?

KNOW the rules and

FOLLOW the rules!

Cash < $250

Property <$250

Property $250-$500

Property >$500

Property $5,000+ except publicly traded securities

Property >$500,000Artwork >$20,000 except publicly traded securities

Cash $250+

As the opportunities for serious abuse increase, so do gift documentation requirements

Documenting Charitable

ContributionsPart I: Introduction

Documenting Charitable

ContributionsPart II: Cash Gifts

Donor Records

Charity Statement

Charity Statement

Qualified Appraisal

Cash < $250

Property <$250

Property $250-$500

Property >$500

Property $5,000+ except publicly traded securities

Property >$500,000Artwork >$20,000 except publicly traded securities

Donor Records

Why? …did you give? quid pro quo?

Who? What? When? Where?

How? …did you value it?

IRS Form8283

Cash $250+

IRS Form1098-C

Summary of Qualified Appraisal on

8283

Donor Records

Charity Statement

Charity Statement

Qualified Appraisal

Cash < $250

Property <$250

Property $250-$500

Property >$500

Property $5,000+ except publicly traded securities

Property >$500,000Artwork >$20,000 except publicly traded securities

Donor Records

Why? …did you give? quid pro quo?

Who? What? When? Where?

Cash $250+

or

How? …did you value it?

IRS Form8283

Summary of Qualified Appraisal on

8283

Note from charity before taxes filed or due

(1) Amount(s), date(s) & donor Credit Card Statement

Charity 210.00Two Hundred and No/100

A. DonorGift

Donor Records

Charity Statement

Charity Statement

Qualified Appraisal

Cash < $250

Property <$250

Property $250-$500

Property >$500

Property $5,000+ except publicly traded securities

Property >$500,000Artwork >$20,000 except publicly traded securities

Donor Records

Why? …did you give? quid pro quo?

Who? What? When? Where?

Cash $250+

How? …did you value it?

IRS Form8283

Summary of Qualified Appraisal on

8283

Note from charity before taxes filed or due

(1) Amount(s), date(s) & donor

(2) “No goods or services were provided in exchange for these gifts.” [or describe and value items provided]

Charity 210.00Two Hundred Ten and No/100

A. DonorGift

Charity 240.00Two Hundred Forty and No/100

A. DonorGift

Charity 230.00Two Hundred Thirty and No/100

A. DonorGift

Charity 260.00Two Hundred Sixty and No/100

A. DonorGift

I give through payroll deduction at work to a united appeal, so, there isn’t a specific charity to give a receipt.

How do I substantiate?

If any single gift is $250+, use a pledge card indicating no goods or services were given in exchange, and the W-2 or paystub to substantiate.

What about documenting

gifts of property?

Documenting Charitable

ContributionsPart II: Cash Gifts

Documenting Charitable

ContributionsPart III: Property

Gifts

Donor Records

Charity Statement

Charity Statement

Qualified Appraisal

Cash < $250

Property <$250

Property $250-$500

Property >$500

Property $5,000+ except publicly traded securities

Property >$500,000Artwork >$20,000 except publicly traded securities

Donor Records

Why? …did you give? quid pro quo?

Who? What? When? Where?

Cash $250+

How? …did you value it?

IRS Form8283

Summary of Qualified Appraisal on

8283

Note from charity before taxes filed or due

(1) Donor and date, location & description of property

Donor’s reliable records of gift, charity, date, place, FMV (and cost basis if relevant)

So then, how exactly would this work?

For property gifts under $250, a receipt is not required where it is impractical

Note from charity before taxes filed or due

(1) Donor and date, location & description of property

Donor’s reliable records of gift, charity, date, place, FMV (and cost basis if relevant)

Donor Records

Charity Statement

Charity Statement

Qualified Appraisal

Cash < $250

Property <$250

Property $250-$500

Property >$500

Property $5,000+ except publicly traded securities

Property >$500,000Artwork >$20,000 except publicly traded securities

Donor Records

Why? …did you give? quid pro quo?

Who? What? When? Where?

Cash $250+

How? …did you value it?

IRS Form8283

Summary of Qualified Appraisal on

8283

Note from charity before taxes filed or due

(1) Donor and date, location & description of property

(2) “No goods or services were provided in exchange for these gifts.” [or describe and value items provided] *

*Part (2) not required for gifts <$250

Donor’s reliable records of gift, charity, date, place, FMV (and cost basis if relevant)

Donor Records

Charity Statement

Charity Statement

Qualified Appraisal

Cash < $250

Property <$250

Property $250-$500

Property >$500

Property $5,000+ except publicly traded securities

Property >$500,000Artwork >$20,000 except publicly traded securities

Donor Records

Why? …did you give? quid pro quo?

Who? What? When? Where?

Cash $250+

How? …did you value it?

IRS Form8283

Summary of Qualified Appraisal on

8283

Note from charity before taxes filed or due

(1) Date, location, and description of property

(2) “No goods or services were provided in exchange for these gifts.” [or describe and value items provided]

Donor’s reliable records of gift, charity, date, place, FMV (and cost basis if relevant)

Donor Records

Charity Statement

Charity Statement

Qualified Appraisal

Cash < $250

Property <$250

Property $250-$500

Property >$500

Property $5,000+ except publicly traded securities

Property >$500,000Artwork >$20,000 except publicly traded securities

Donor Records

Why? …did you give? quid pro quo?

Who? What? When? Where?

How? …did you value it?

IRS Form8283

Cash $250+

IRS Form1098-C

Summary of Qualified Appraisal on

8283

Note from charity before taxes filed or due

(1) Date, location, and description of property

(2) “No goods or services were provided in exchange for these gifts.” [or describe and value items provided]

Donor’s reliable records of gift, charity, date, place, FMV (and cost basis if relevant)

Donor Records

Charity Statement

Charity Statement

Qualified Appraisal

Cash < $250

Property <$250

Property $250-$500

Property >$500

Property $5,000+ except publicly traded securities

Property >$500,000Artwork >$20,000 except publicly traded securities

Donor Records

Why? …did you give? quid pro quo?

Who? What? When? Where?

Cash $250+

How? …did you value it?

Summary of Qualified Appraisal on

8283

IRS Form8283

Summary of qualified appraisal included on Form 8283

Note from charity before taxes filed or due

(1) Date, location, and description of property

(2) “No goods or services were provided in exchange for these gifts.” [or describe and value items provided]

Donor’s reliable records of gift, charity, date, place, FMV (and cost basis if relevant)

Donor Records

Charity Statement

Charity Statement

Qualified Appraisal

Cash < $250

Property <$250

Property $250-$500

Property >$500

Property $5,000+ except publicly traded securities

Property >$500,000Artwork >$20,000 except publicly traded securities

Donor Records

Why? …did you give? quid pro quo?

Who? What? When? Where?

Cash $250+

How? …did you value it?

IRS Form8283

Summary of Qualified Appraisal on

8283

Note from charity before taxes filed or due

(1) Date, location, and description of property

(2) “No goods or services were provided in exchange for these gifts.” [or describe and value items provided]

Qualified Appraisal

(attach the entire appraisal

report to the tax return)

Donor’s reliable records of gift, charity, date, place, FMV (and cost basis if relevant)

Note from charity before taxes filed or due

(1) Date, location, and description of property

(2) “No goods or services were provided in exchange for these gifts.” [or describe and value items provided]

Donor’s reliable records of gift, charity, date, place, FMV (and cost basis if relevant)

Charities need not report quid pro quo information for gifts of $75 or less.

Donors need not consider quid pro quo benefits

•Item value does not exceed 2% of the donation or $106*

•Item cost ≤$10.60* and gift $53.00*+

*adjusted annually for inflation (2016)

De Minimis

Documenting Charitable

ContributionsPart III: Property

Gifts

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Documenting Charitable

Contributions

Russell James, J.D., Ph.D., CFP®

ProfessorTexas Tech University