Donation over 5K

[nkustura]

Had a drop off return yesterday where a client donated furniture and appliances to some religist organizations and says the value of everyhting was $7500. He doesn't have the appraisal letter but says he does have a receipts from the organization where he donated. Any comments on how to handle this one??????

[BHoffman]

Had a drop off return yesterday where a client donated furniture and appliances to some religist organizations and says the value of everyhting was $7500. He doesn't have the appraisal letter but says he does have a receipts from the organization where he donated. Any comments on how to handle this one??????

I start with asking the client for a specific list of goods and then go to the valuation guide at goodwill.org:

http://www.goodwillpromo.org/page/guest/about/howweoperate/donations/claimingtaxdeductions

You might also give the client Pub 526, or at least the pertinent pages regarding valuation, the requirement for appraisal, and the penalties.

Have you seen the receipts from the organization? I wonder if the religious organization was able to actually sell the donated goods during 2009, and arrived at the $7,500 based on actual amounts. That, of course, would be too easy

I would handle this by asking the client for details and be careful not to treat the conversation as some sort of interrogation. I'd remind the client that IRS has hired a bunch of new auditors and charitable contributions are high on the list of things they look at closely. I'd tell the client that he should surely take all of his legal deductions, but make sure his records are absolutely sterling.

[BHoffman]

....and welcome to the message board!

[nkustura]

Appraisal Letter

Is the appraisal letter required for this type of donation?

[nkustura]

Thanks

Thanks for your reply and thanks for welcoming me
This message board seems to be a great resource.

Thanks again!

[oceanlovin'ea]

pictures

Tell them the next time they donate large items such as that, they should take pictures before they donate them. If they have the receipts where they originally bought the furniture that would show that it was high end and expensive furniture, that would also help.

And welcome to the board, also. You will love these people. They are such a help.

Linda

[BHoffman]

I'm not sure about the appraisal letter because this is a bunch of stuff and not just one item. Others will probably weigh in during the next day or two.

The message board is great. Goes without saying that your own judgment is the deciding factor.

[Burke]

Is the appraisal letter required for this type of donation?

The appraisal is only required for a single item over $5,000. I had one a couple of years ago where the TP's father died, and they contributed an entire condo's worth of furniture and household goods to a charity. He wanted to take $10,000. Knowing the family would have kept anything of great value, I convinced him to value it at much less. The resell value at a thrift shop is way lower than most people consider. I was just at a consignment shop yesterday and they had some mighty nice things, but none over a few hundred dollars.

[JohnH]

You're going to need the receipts (or copies) for each of the donations in order to fill out the Form 8283. I'd suggest having the client enter the FMV, condition, acquisiton date, and original cost on each of the receipts in their own handwriting.

I'd also have them sign a separate statement summarizing the info exactly as it will appear on the 8283, with specific wording stating that the client is aware that you are using his estimates and that he must provide adequate documentation if the return is audited. Too many clients have an inflated idea of what their junk is worth, and if they can bully you into accepting the info they provide verbally, they think you're then on the hook if anything goes wrong. You need to push the responsibility for valuation squarely back on them and leave no doubt in their minds that they are in the hot seat.

I've seen quite a few people have a change of mind about what values to use when I asked them to sign a statement for my files. Suddenly, when they realized I wasn't going to carry water for them, that fine lamp worth $100 turned into a broken but usable fixture with a value of $10, along with a host of other changes.

And welcome to the forum - it's a treasure chest of info & assistance.