Special Rules Regarding Gifts In Kind

Non ProfitThere are special IRS rules pertaining to gifts in kind for the recipient nonprofit and the donor.

The  recipient nonprofit organization can only acknowledge the date of receipt, description of the property, and its standing as a public charity eligible to receive donations from the public.  The assertion of the value of the property rests entirely on the donor.

The donor claiming a charitable deduction must comply with several steps. For any property donated with a purported value > $5,000, certain formalities must be followed in order to support the claiming of the charitable deduction by the donor.  These formalities fall to the donor to ensure full compliance and are summarized in the following steps:

  • Obtaining a “qualified appraisal”, which includes use of a certified, accredited appraiser to specifically value the property;
  • production of a report signed by the appraiser;
  • submission of the appraisal to the nonprofit organization for verifying its completion and “reasonableness” (the organization typically checks to see the report was signed by an accredited appraiser and the topic of the report matches the item donated);
  • sign-off on Form 8283, p2 by both the qualified appraiser AND the recipient nonprofit organization acknowledging all of the above steps as properly and timely executed.  The donor leaves a copy of form 8283 with the organization and retains the original, signed form for submission with his/her personal tax return that will claim the deduction.
  • Follow-up by the recipient organization should it not retain the property and instead choose to sell (for cash or other goods) within a year of the donation receipt.

These formalities may take time and additional cost which is typically borne by the donor.  Absent these formalities, to reiterate the organization will never put itself in the place of an appraiser and attempt to ascribe a value (even if the deduction claimed is <$5,000); the donor would be left solely to his/her own records to support any claimed deduction with the nonprofit organization only providing proof of the date of receipt and description of the item.

Langdon & Company LLP provides tax consultation to nonprofits and individuals.