Appraisals of Gifts and Donations

John McMann • 3/10/2020
With tax season quickly approaching, it’s important that taxpayers and tax preparers have adequate documentation before filing with the IRS. When donating real or personal property, the IRS has defined conditions that must be met for the value of the donation to qualify for a tax deduction.

To meet the requirements set forth by the IRS, any single donation over $5,000 in value or cumulative donations within a tax year to a single organization over $5,000 require the donor to obtain a qualified appraisal conducted by a qualified appraiser.

Taxes

A few examples our team has encountered include donation of medicaloffice condos to a healthcare provider, donation of furniture and fixtures and office equipment by architectural firm to a nonprofit organization, and donation of surplus electrical supplies by contractor to Habitat for Humanity.

A qualified appraisal document is made, signed, and dated by a qualified appraiser in accordance with generally accepted appraisal standards generally defined as the requirements set forth in the Uniform Standards of Professional Appraiser Practice. A qualified report should:

  • Meet the relevant requirements of Regulations Section 1.17A-13(c)(3) and Notice 2006-96, 2006-46 I.R.B.902
  • Not be made earlier than 60 days before the date of contribution to the appraised property
  • Note the condition of the property
  • Utilize the definition of Fair Market Value as set forth by the IRS
  • Outline the appraisal methodologies applied
  • A statement that the appraisal will be utilized for federal income tax purposes
  • Not involve a prohibited appraisal fee, and includes certain information as stipulated in IRS Document 561
  • Be conducted by a qualified appraiser

Who is a qualified appraiser?

The IRS defines a qualified appraiser as an individual who:

  • Has earned an appraisal designation from a recognized professional appraisal organization or has met certain minimum education and experience requirements.
  • Regularly prepares appraisals for which the individual is paid
  • Demonstrates verifiable education and experience in valuing the type of property being appraised
  • 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 three-year period ending on the date of the appraisal
  • Is not an excluded individual (someone who is the donor or recipient of the property)

The deadline to file is April 15, although it is also possible perform a retrospective appraisal to amend 2018 tax returns. For more information or create a tax plan, contact a member of our Valuation & Advisory team.


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