Noncash charitable contributions

Income tax again, time for appraisals of noncash charitable cntributions – museum donations of fine or decorative art, public charities receiving Buicks and Fords.  If the donated item is to be used in the organization’s regular operations “fair market value” will be summarized on IRS form 8283 and signed by the appraiser.  However, if the item is disposed of within 3 years, the donee organization should give IRS form 8282 to the donor.  This procedure entails a value of actual sale.  

Generally, a non-cash deduction of more than $5,000 must be substantiated.  For lesser amounts the donor still must have a basis for the valuation.  As an appraisal is a legal document which might have to be defended in court, the appraisal must be undertaken by a qualified appraiser, one who has been recognized by a professional appraiser society through coursework, an examination, and continuing education.

Taking an assignment whereby the client has pre-determined expectations is not allowed.   An appraiser must be entirely neutral, never being adversarial or preparing a case which favors any party; fees must be based on appraisal time rather than on value. A work file including appraisal notes and a replica of the appraisal report, must be kept and held for five years, or for two years after any judicial proceeding in which the appraiser testifies.  This file should include all pertinent data, information, and documentation.

Appraising entails differing market situations, from replacement cost for insurance, to liquidation for divorce settlement, to that for a quick emergency sort of liquidation.  The definition used by the IRS for tax related purposes is “fair market value”, something congenial between buyer and seller, and for the donor.

Fair market value is defined by the IRS as “The price that property would sell for in the open market.  It is the price that would be agreed upon by a willing buyer and a willing seller, with neither being required to act and both having reasonable knowledge of the facts.”

Victor Wiener who guided the early years of the appraisal profession noted three components of “fair market value” (1) a willingness to undertake a commercial transaction, (2) absence of compulsion, and (3) with full knowledge of facts. These qualities favor a negotiated price, fair to both parties.

The data used are specific to the market which is most likely for the transaction. For example, in a case of unset gems donated to the Smithsonian Institution (Anselmo v. Commissioner, 1983), the Tax Court found that the amount claimed should reflect prices paid by jewelers at the wholesale gems market, rather than by the public in retail situations.  Collectors and Old Times readers know the best sources for pricing within their respective interests.[J1] 

Collector car prices are published in Hemmings Motor News.  Auction sales are preferred for fine or decorative art.   These are published in subscription data bases such as Askart, Invaluable, Artnet, and Artprice. As this data is published it is verifiable; internet sales are less encouraged as records vanish, and circumstances are not often clear. The data should be recent, typically within 5 years.

A nearly perfect “fair market” is American collectable coins, with prices published in the Whitman Redbook, 1947 to present. Conveniently in this market wholesale and retail values are typically within 5% of each other.  

As an appraisal is an opinion of value, it is subjective, more art than a science.  Yet the goal is

for another appraiser to reach a similar value.  This comes with experience.


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