Donating clothes

[AZ-Tax]

Got a client who donated 54 separate items of pants, shirts, pair of shoes, etc.. no suits and the TP came up with a value of $3,075 (thift value). All they have is those little door knob receipts from Vietnam Vets with no dollar amts on them. No letters of any type. They donated all the items to one charity on several occassions. To potentially not raise a red flag with the IRS, would it be better to spread out donations at the dates they were donated (some of the door knob receipts dont have dates) or can I just lump sum as one donation?

[AJsTax]

donations

can be a real controversial subject in the office. We had one this week that wanted to do $10,000 to Goodwill. "But we have the receipts and lists!" When we requested the proof the amount dropped to less than half that.
I like to use the list on TTB page 4-2 for people in the office or to give ones that are questioning how to value the items. If they don't have a list, then they don't really a leg to stand on and we try to get them to take a minimal amount. If they insist on a high number we document that in our files for future reference.
You state they had a number of 54 items. Should be able to match that up against the list in the book or on the website of The Salvation Army or Goodwill. I have seen several.
I see so many that I do not agree with, but if they feel they can prove it, I state the rules, document the issue and move on.
In a way it is a shame to have to make it so hard to give to a charity. I guess it is not hard to give, just to take tax credit for it. hhhmmmmm.

[Kram BergGold]

54 items

54 items of clothing valued at $10 each whihc is generous I think equals $540. I would make them put a price next to eahc item and tell them to make it $495 becasue once it reaches $500 I charge more for the form and you will lose money on the extra $45..

[Jesse]

I think he means 54 different times donated items of pants, shirts, pair of shoes, etc?

I have had a couple of these and entered in each date with a generalized list, never more than 15 and only a couple which happened to be friends or I would have thought twice about that too.

With 54 different ones I would have to think twice about even doing the return. Maybe you can lump them together and enter 12 different ones, one for each month? I don't know if there would be any penalties for this or if it is technically correct?

[JSLATER]

I had a client three years ago, who gave around $4500 with a list of the cost and FMV and was audited just for that one deduction. It was all suits and the like for a businessman. The catch was the weight loss surgery he went through the previous year and which caused the "donation" which the auditor reluctantly accepted!

[Zee]

It's Deductible

I've always suggested using the taking pictures of everything donated, separated by category and using the lower, or mid-values from the It's Deductible program. It started as a stand-alone program developed by a CPA who established the values by on-site visits to used resale shops operated by the Salvation Army, Goodwill, etc. The values are definitely much higher than garage sale pricing as they should be. It's Deductible was acquired by Intuit some time ago. I still recommend using it. They used to offer an audit guarantee on the numbers, so if they were significant it might be worth it (I don't know if they still do, or not). If the client could also produce documentation of the purchase price, that'd be great. But, how many keep receipts from clothing purchases? In addition, it's deductible also offers values on other non-clothing items.

I've also had people supply a generic suggested donation value listing provided by the Salvation Army and Goodwill. I haven't seen any recently, and was surprised they were provided.

[zeros]

How much would they be willing to pay for it?

If the donation seems excessively high, I ask what they would be willing to pay for it if they were the buyer instead of the donor. Sometimes this helps to lower the amount.

[AJsTax]

suggested price list

I've also had people supply a generic suggested donation value listing provided by the Salvation Army and Goodwill. I haven't seen any recently, and was surprised they were provided.

This is the link to the list on Goodwill today.
as you can see, for 54 individual items as he stated in the original post, it would be hard to get much over $500.

http://www.goodwill.org/pub/2008%20Valuation%20Guide.pdf

Each donor has to make a decision on what they think is fair.

[Zee]

This is the link to the list on Goodwill today.
as you can see, for 54 individual items as he stated in the original post, it would be hard to get much over $500.

http://www.goodwill.org/pub/2008%20Valuation%20Guide.pdf

Each donor has to make a decision on what they think is fair.

Here's a link to a free version of It's Deductible. I haven't looked at it this year. You might try a comparison to the Goodwill values, I'm sure you'll find It's Deductible's values higher.

http://turbotax.intuit.com/personal-taxes/itsdeductible/

[FEDUKE404]

Numbers seem way out of line

I think your client is just asking for an audit. No matter "how good" the pants or whatever were, they will sell at the Goodwill Store prices, which is hardly in the range of $57 each.

Also a new client presented me with some "It's Deductible" values for a bunch of stuff donated in 2007. I was mildly shocked at some of the so-called values that the software was spitting out. To make matters worse, the Form 8283 was incomplete.

I make it a point to explain to my clients exactly what "fair market value" involves. I also tell them to obtain a current price list from Goodwill to see what prices are routinely involved. Although I have seen some legitimately large numbers (death of person, detailed inventory of all items donated) at times, the usual "couple bags of clothes" route is not a wise move.

As for the "spreading out the dates" plan - I don't see how that will accomplish much as you are still facing a Form 8283 situation regardless.

FE

[S T]

I like Its Deductible

and I have referred several of my clients that seem to make a lot of contributions. At least I am able to receive a print out of low to high values

Another consideration would be the income of the taxpayer and where do they normally shop. Are they shopping at Nordstrom's or Neiman Marcus, or are they shopping at Walmart, Target, Kohl's or Macy's.

Would make a difference not only in the original cost value, but also what the fmv might be.

Sandy

[Zee]

I think your client is just asking for an audit. No matter "how good" the pants or whatever were, they will sell at the Goodwill Store prices, which is hardly in the range of $57 each.

Also a new client presented me with some "It's Deductible" values for a bunch of stuff donated in 2007. I was mildly shocked at some of the so-called values that the software was spitting out. To make matters worse, the Form 8283 was incomplete.

I make it a point to explain to my clients exactly what "fair market value" involves. I also tell them to obtain a current price list from Goodwill to see what prices are routinely involved. Although I have seen some legitimately large numbers (death of person, detailed inventory of all items donated) at times, the usual "couple bags of clothes" route is not a wise move.

As for the "spreading out the dates" plan - I don't see how that will accomplish much as you are still facing a Form 8283 situation regardless.

FE

It's Deductible provides a range of values, and there's no question they will seem high to a conservative tax preparer. I'm not sure how the values are calculated by Intuit. When It's Deductible was developed by a small CPA firm, they developed the number by visits and sampling. I suppose Intuit does the same thing.

What can a tax preparer base his numbers on? Garage sales they've been at? As I've said, almost nobody will have records of when they actually purchased most donated goods and the costs (especially clothing). If the taxpayer wishes to use It's Deductible values, or Goodwill values, it's the best we have available. I would simply caution the client that the values might be challenged, and indicate that I would take no responsibility for the values.

I did like it better when an audit guarantee was also offered on the It's Deductible values. It was easy to suggest the client purchase the guaranty as well if they wished to use the numbers with the same audit cautions.

[FEDUKE404]

How do you avoid Goodwill FMV ??

and I have referred several of my clients that seem to make a lot of contributions. At least I am able to receive a print out of low to high values

Another consideration would be the income of the taxpayer and where do they normally shop. Are they shopping at Nordstrom's or Neiman Marcus, or are they shopping at Walmart, Target, Kohl's or Macy's.

Would make a difference not only in the original cost value, but also what the fmv might be.

Sandy

I hear some of this viewpoint a lot, and would like more details of your perspective to justify use of the "expensive clothes" approach. Apparently that is also how "It's Deductible" justifies the higher valuations.

Around here, if you donate a pair of pants bought at Walmart or a pair of pants bought at Saks, the Goodwill store sells them for the same price. That, at least in my quasi-informed opinion, is what would constitute "fair market value." Now perhaps at a controlled yard sale, or a higher end commission resale store, I could see your point for a higher valuation. BUT if the taxpayer has a handful of receipts from Goodwill or Vietnam Vets, I personally do not see how much relevance the "purchase price" has with the price of eggs.

Just curious.......

FE

[S T]

Different Locations

An example in California would be Goodwill locations close to $1,000,000 homes will sell their items at a higher price, than a Goodwill location in a median price range of $150,000 to $200,000. Probably depends on the item. A blouse or shirt for example is not just a blouse or shirt. It might have cost $20 at Walmart and $75 at Nordstroms. The fmv would be different depending on the age, condition, etc. Same analogy as a vehicle.

Ultimate decision is how much time and effort the taxpayer would like spend to prepare their deduction list for all of the necessary information to substaniate the deduction.

Sandy

[FEDUKE404]

Location location location

An example in California would be Goodwill locations close to $1,000,000 homes will sell their items at a higher price, than a Goodwill location in a median price range of $150,000 to $200,000. Probably depends on the item. A blouse or shirt for example is not just a blouse or shirt. It might have cost $20 at Walmart and $75 at Nordstroms. The fmv would be different depending on the age, condition, etc. Same analogy as a vehicle.

Ultimate decision is how much time and effort the taxpayer would like spend to prepare their deduction list for all of the necessary information to substaniate the deduction.

Sandy

Thanks for the explanation, although I remain confused as to how items donated to a business with an address in Town A can be valued by using Town B market valuations.

Regardless of whether I am "conservative" or not, I at least stand by my original observation that the $3,075 valuation probably would not pass muster upon audit, especially with only a few "door knob receipts" in hand.

FE