Who is going to appraise those bags of clothes? If you’ve prepared tax returns for a long time, you have probably seen something like this in client tax information:
In addition to (probably) failing the charitable documentation requirements we discussed yesterday, another shortcoming would be fatal for the deduction: the lack of a “qualified appraisal.” When you make a non-cash donation exceeding $5,000, the tax law requires the filing of Form 8283 supported by a qualified appraisal for the property. Only a few items, including publicly-traded securities, are exempt from this requirement (details here). Otherwise, it’s no appraisal, no deduction.
The tax law sets strict requirements for a qualified appraisal. Some relate to the contents and timing of the appraisal report. For example, an appraisal made more than 60 days before the contribution doesn’t work, and the appraisal can’t be received after the due date of the return, including any extensions received. That means you can’t wait for the IRS to audit you to get the appraisal.
The tax law also doesn’t let just anyone do the appraisal. The appraiser must meet minimum credential requirements and regularly appraise the property type at issue. The appraiser also cannot be:
The donor of the property, or the taxpayer who claims the deduction.
The donee of the property.
A party to the transaction in which the donor acquired the property being appraised, unless the property is donated within 2 months of the date of acquisition and its appraised value is not more than its acquisition price. This applies to the person who sold, exchanged, or gave the property to the donor, or any person who acted as an agent for the transferor or donor in the transaction.
Any person employed by any of the above persons. For example, if the donor acquired a painting from an art dealer, neither the dealer nor persons employed by the dealer can be qualified appraisers for that painting.
Any person related under section 267(b) of the Internal Revenue Code to any of the above persons or married to a person related under section 267(b) to any of the above persons.
Going back to our clothing donation, good luck getting that stuff you dropped off after last year’s spring cleaning appraised now. But, you say, that wasn’t one $12,000 donation! There were at least 20 garbage bags of stuff. That’s 20 $600 donations. No problem!
Problem. The Treasury Regulations determine whether the $5,000 limit is met using (my emphasis):
…the aggregate amount claimed or reported as a deduction for a charitable contribution… for such items of property and all similar items of property… by the same donor for the same taxable year (whether or not donated to the same donee).
So 20 bags of clothes are still one donation.
The IRS, and the courts, are strict about the appraisal requirement. If you’ve donated something worth more than $5,000 to charity and you don’t have the appraisal, extend your return and get one before it’s too late. Remember, no appraisal, no deduction.
Come back every day through April 15 for another 2015 filing season tip!
The House Government Oversight Committee plans to hold a public hearing regarding Iowa’s civil forfeiture laws as a result of a series of articles published by The Des Moines Register.
Rep. Bobby Kaufmann, R-Wilton, who chairs the committee, said the panel was discussing future speakers at its Thursday meeting when representatives brought up the articles and expressed interest in the issue.
“After talking with several members of law enforcement, I feel a supermajority of law enforcement are conducting themselves in the best manner possible and I believe they’re following Iowa’s civil asset forfeiture law,” he said. “But there are outlier cases where there should maybe be a higher standard for when people’s cash can be seized.”
I’m not sure that talking with the beneficiaries of the system is really the way to determine whether it’s unjust. I suspect a poll of Vikings loading their longboats with loot and captives would also find a supermajority feeling they were conducting themselves “in the best manner possible.” It’s also not helpful that they are “following Iowa’s civil asset forfeiture law” if the law is a license to steal.
It’s a matter of due process. Civil forfeiture imposes what amounts to outlandish fines without conviction, or even arrest, and it puts the burden of proof on the citizen, whose resources to fight the forfeiture have, conveniently, been seized by the state.
It’s also a matter of incentives. If a law enforcement agency gets to keep what it seizes, and faces no punishment for seizing items unjustly, their incentive is to take stuff unjustly. And that’s what happens.
Jason Dinesen, Should a Business Owner Keep Their Own Books?
If you viewed the Tax Court decision in the case of Midwest Eye Center as a wake-up call for people who have highly profitable professional practices inside C corporations, I think you would be mistaken. The wake-up call was in 1986. This decision is hitting them over the head with a two by four, particularly coming on top of the Vanney Associates, Inc decision late last summer.
Peter is discussing the case I discussed here.
Stephen Olsen, Summary Opinions for the weeks of 3/06/15 through 3/20/15 (Procedurally Taxing), rounding up courtroom and administrative tax procedure happenings.
Robert Wood, Real ‘Mystic Pizza’ Owner Pleads Guilty To Tax Evasion, Could Face 15 Years. It’s the time of year when tax prosecutors get busy, to motivate the rest of us.
Liz Malm, Michigan House Lawmakers Pass Bill Ending Film Incentive Program (Tax Policy Blog). Unfortunately for Michigan, the bill may not pass.
Howard Gleckman, For Most Households, It’s About the Payroll Tax, Not the Income Tax (TaxVox)
TaxProf, The IRS Scandal, Day 694
Career Corner: Going Concern March Madness: The #BusySeasonProblems Championship — Deteriorating Mental Health vs. That Voice Inside Your Head (Caleb Newquist, Going Concern)