Frequently taxpayers make multiple charitable contributions during the year and if the total of those contributions exceeds $5,000, is a qualified appraisal required?
In determining whether the $5,000 limitation has been exceeded, property and all similar items of property (see below) donated to one or more donees are treated as one property (Code Sec. 170(f)(11)(F)). This rule applies even if the similar items are donated to two or more different charitable donees (Reg § 1.170A-13(c)(1)(i); Prop Reg § 1.170A-16(f)(5)(ii)).
Example: Jay and Emily made three donations of used clothing during the year, $2,500 worth to the Salvation Army, $1,500 worth to the Vietnam Veterans and $2,000 to Goodwill for a total of $6,000. Because the items were all similar in nature (clothing), and because the total exceeded $5,000, Jay and Emily will need to obtain a qualified appraisal.
Similar Items of Property - Similar items of property means property of the same generic category or type, such as stamp collections (including philatelic supplies and books on stamp collecting), coin collections (including numismatic supplies and books on coin collecting), lithographs, paintings, photographs, books, nonpublicly traded stock, nonpublicly traded securities other than nonpublicly traded stock, land, buildings, clothing, jewelry, furniture, electronic equipment, household appliances, toys, everyday kitchenware, china, crystal, or silver (Reg § 1.170A-13(c)(7)(iii)).
Exceptions to the $5,000 Limitation - Reduced requirements apply to contributions of non-publicly traded stock for which the claimed deduction is more than $5,000 but not more than $10,000 and additional requirements apply where a deduction of more than $500,000 is claimed.
No appraisal is required for contributions of publicly-traded securities for which there are readily available market quotations.
Qualified Appraisal – A qualified appraisal of any property means an appraisal that's treated as a qualified appraisal under IRS regs or other guidance; and conducted by a qualified appraiser in accordance with generally accepted appraisal standards and any regulations or other prescribed guidance prescribed (Code Sec. 170(f)(11)(E)(i)(I)).
The instructions to Form 8283, Noncash Charitable Contributions, state that a qualified appraiser is an individual who meets all the following requirements. The individual:
- Either (a) has earned an appraisal designation from a recognized professional appraiser organization for demonstrated competency in valuing the type of property being appraised, or (b) has met certain minimum education and experience requirements.
- Regularly prepares appraisals for which he or she is paid.
- Demonstrates verifiable education and experience in valuing the type of property being appraised. To do this, as part of the appraisal or made separately and associated with the appraisal, the appraiser can make a declaration that, because of his or her background, experience, education, and membership in professional associations, he or she is qualified to make appraisals of the type of property being valued.
- Has not been prohibited from practicing before the IRS under section 330(c) of title 31 of the United States Code at any time during the 3-year period ending on the date of the appraisal.
The appraiser must complete Part III of Form 8283. See section 170(f)(11)(E), Notice 2006-96, and Regulations section 1.170A-13(c)(5) for details.
Appraisal Timing – Made not earlier than 60 days before the appraisal property's contribution date and no later than the due date (including extensions) of the return on which the charitable contribution deduction's first claimed for the donated property or, if the deduction's first claimed or reported on an amended return, the date the amended return is filed.
Appraisal Fees – Appraisal fees are generally not included as part of the charitable contribution; however, they may be deductible as a tier 2 miscellaneous itemized deduction as an expense paid in connection with determining tax liability (Rev Rul 67-461).
Form 8283 – Thorough completion of Form 8283, Section B, is a necessity when claiming noncash contributions that require appraisal. In addition to the declaration and signature of the appraiser in Part III, the details of the item(s) donated must be completed in Part I, and Part IV must be completed and signed by a representative of the donee (charitable organization). Generally it is not necessary to attach a copy of the appraisal, but one exception is if the donated property is art valued at $20,000 or more. See the instructions to the 8283 for other times when the appraisal is to be attached.
Note: special rules that apply to the donation of vehicles are not covered in this article.