Donating similar items and the need for an appraisal

[LCP]

First, does everyone operate under the concept that "clothing" is one similar category requiring that donations of "clothing" in excess of $5,000 for the year be reported on Part B of Form 8283 and as such require an appraisal?

Assuming that to be the case, it appears that we should advise our particularly wealth clients (if we have any) at the beginning of each year to anticipate their giving for the year. If they expect to donate clothing that totals more than $5000 they need to store it, get an appraisal of the entire lot and then donate it.

[Bees Knees]

I would have a hard time excepting anyone's claim that they donated more than $5,000 worth of clothing during the year. Unless you are a clothing store donating clothes to a charity thrift shop, I doubt anybody really has that much in clothes.

If you disagree, then try putting all of those clothes out on your front lawn and hold a yard sale and see how much you will actually get.

Oh, you say? You have expensive designer clothes? Tell me, when was the last time you ever heard of a rich lady going to a yard sale and paying top dollar to buy used expensive designer clothes? I don't care if that suit cost $1,000 and the husband only wore it twice. If I'm going to pay a $1,000 for a suit, I'm not going to buy it used.

Remember, fair market value means the price a buyer is willing to pay. Used clothes are valued at what somebody is willing to pay, and the more expensive the used clothes are, the less likely you will find a willing buyer.

Its like a new car. If I am going to pay $30,000 for a new car, I want the one that only has 10 miles on the odometer, not the one with 150 miles on it.

[Burke]

See TTB-4-2. Give this to the TP and have them detail each item given away and its value, which is required by the IRS under their recordkeeping rules. You can highlight this rule on the page. (The $5K amt for appraisal applies to each item donated.) If they don't like the TTB one, these are all over the Internet -- Salvation Army, Goodwill, etc etc. Unless I have this detail, I don't put the donation on the return. You can group items, like xxx slacks, xxx blouses, xxx ladies shoes, etc. "Bags" and "Boxes" are not allowed as itemization.

[LCP]

See TTB-4-2. Give this to the TP and have them detail each item given away and its value, which is required by the IRS under their recordkeeping rules. You can highlight this rule on the page. (The $5K amt for appraisal applies to each item donated.) If they don't like the TTB one, these are all over the Internet -- Salvation Army, Goodwill, etc etc. Unless I have this detail, I don't put the donation on the return. You can group items, like xxx slacks, xxx blouses, xxx ladies shoes, etc. "Bags" and "Boxes" are not allowed as itemization.

The $5k rule also applies to "similar" items. "Clothing" is a category according to p.2 of the Form 8283 instructions.

[LCP]

I would have a hard time excepting anyone's claim that they donated more than $5,000 worth of clothing during the year. Unless you are a clothing store donating clothes to a charity thrift shop, I doubt anybody really has that much in clothes.

If you disagree, then try putting all of those clothes out on your front lawn and hold a yard sale and see how much you will actually get.

Oh, you say? You have expensive designer clothes? Tell me, when was the last time you ever heard of a rich lady going to a yard sale and paying top dollar to buy used expensive designer clothes? I don't care if that suit cost $1,000 and the husband only wore it twice. If I'm going to pay a $1,000 for a suit, I'm not going to buy it used.

Remember, fair market value means the price a buyer is willing to pay. Used clothes are valued at what somebody is willing to pay, and the more expensive the used clothes are, the less likely you will find a willing buyer.

Its like a new car. If I am going to pay $30,000 for a new car, I want the one that only has 10 miles on the odometer, not the one with 150 miles on it.

That's fine..... but it could happen.

If you don't like the "clothing" example, here's another ......... a client donates a painting worth $2000 in January. In December she donated a $10,000 painting and got a qualified appraisal just like she was supposed to. She wants to deduct $12,000 but the rules say she needs an appraisal for the first painting too (and let's say it's too late for some reason.)

[Burke]

There is an entire IRS Publication devoted to this subject, Pub. 561. Note the specific information on used clothing and household goods. It states "an item of clothing...." valued at more than $500 needs an appraisal. Same with household goods, per item. Then there is information about similar items given whether they are to the same donee or not. I have a client who always wants to take $2,000 every year for Goodwill. I always refuse to do it without the receipts and documentation which she says she has at home. Then she calls me back, and says "well, if I have to go to all that trouble, just take it off," and I do. And the next year rolls around and she does the same thing, same amount. I guess she thinks I will forget.

[LCP]

Well it wouldn't be the first time that IRS publications and directions were conflicting, vague or poorly written but for the record this is from page 2 of the instructions for the 8283:

Section B. Include in Section B only items (or groups of similar items) for which you claimed a deduction of more than $5,000. Do not include publicly traded securities reportable in Section A. With certain exceptions, items reportable in Section B require a written appraisal by a qualified appraiser. You must file a separate Form 8283, Section B, for each donee organization and each item of property (or group of similar items).

Similar Items of Property
Similar items of property are items of the same generic category or type, such as coin collections, paintings, books, clothing, jewelry, nonpublicly traded stock, land, or buildings.

[snowshine]

Even with clothing it can happen. I have a new client this year who gave away 20k+ in clothing (fur coats and the like) to our local ballet company. The ballet had them appraised.

[Burke]

I can see where certain cases can be justified with specialty clothing. But can you see the average TP getting an appraisal on general, everyday boxes and bags of clothing & HH goods? Not gonna happen, and no certified appraiser is going to waste his time with those things anyway. I have seen mink coats (in consignment shops) which are priced up to $1,200.

[taxea]

I have understood the appraisal rule to mean "per item" so if any individual item does not have a FMV that requires an appraisal the donation for the compiled items can amount to anything up to 50% of the TP AGI