Qualified appraisals for charitable donations of property.

• Author: Kelly, Terence E.

Property donated to charity is deductible for income tax purposes subject to certain limitations. Special rules apply to gifts to private foundations. The most common gifts made are donations of household goods, etc., to Goodwill and other similar organizations, and gifts of appreciated stock of publicly traded corporations to public charities.

If the property's value exceeds $5,000, a written appraisal must be obtained (except for nonpublicly traded stock of $10,000 or less and publicly traded securities). An aggregation rule applies so that a series of gifts, each valued at $5,000 or less, is considered as one gift for the appraisal rules if the aggregate value exceeds $5,000. If a qualified appraisal is required to support an income tax deduction, and none is obtained, no deduction is permitted.

Although most donors and donees are aware of the requirement to file Form 8283, Noncash Charitable Contributions, with Form 1040, they may not be aware of the strictness of the rules relating to the need to obtain a "qualified appraisal" (prescribed by Regs. Sec. 1.170A-13(c)). Also, many appraisers may not fully understand the specificity of the appraisal requirements.

These rules apply to contributions by individuals, closely held corporations, personal service corporations, S corporations and partnerships.

Qualified appraisal

A donor who contributes property, other than publicly traded stock, and claims a charitable contribution deduction exceeding $5,000 must satisfy the following requirements:

1. Obtain a qualified appraisal for the property contributed;

2. Attach a fully completed appraisal summary to the return in which the deduction is claimed; and

3. Maintain records containing specified information regarding the contribution.

   The $5,000 threshold becomes $10,000 for a contribution of nonpublicly traded stock. Thus, a contribution of stock, other than publicly traded stock, requires a qualified appraisal if the fair market value (FMV) exceeds $10,000, regardless of the stock's cost. If the FMV exceeds $5,000, but does not exceed $10,000, a qualified appraisal is not required but the records required must be maintained.

   To have a qualified appraisal of the property, the donor must obtain an appraisal before the due date of the tax return in which the deduction is claimed. The appraisal document must:

   * Relate to an appraisal made not earlier than 60 days before the date of the property's contribution;

   * Be prepared, signed and dated by a...