Non Cash Donations

[fliszt]

Larmil, yes

you are correct that items received via inheritance do recieve a stepped up value. I was under the impression (probably wrongly) that to deduct an item given to charity, one had to have paid for it. Not given, through an estate. You've got me wondering Larmil. I'll do some research on this for my own edification.
Thanks for bringing this up.
Larry

[JohnH]

This discussion has been rolling around in my head ever since it was first posted, so I'm bringing it back up.

I've always thought that inherited goods (furniture, appliances, clothing, etc) could be valued at their FMV when donated to a qualified charity. Is there any other info either supporting or refuting this position?

[Bees Knees]

You deduct the FMV of the item when contributed to charity. That is true even if your cost basis is zero.

Items you inherit can be donated and deducted at FMV. Basis is irrelevant.

The only time basis is an issue is when the item would have produced ordinary gain if it were sold. Such as depreciable business property that is subject to depreciation recapture, or inventory. In that case, your donation deduction is limited to basis.

TTB, page 4-16 says:

Contributions of Property—Form 8283
Enter contributions of property on line 17, Schedule A. If used
items were given to charity, such as clothing or furniture, deduct
the FMV of the items at the time of the contribution. See
exceptions below for situations where the deduction is not
based on FMV.

Fair market value is what a willing buyer would pay a willing
seller when neither has to buy or sell and both are aware of the
conditions of the sale. See Fair Market Value Guide for Used Items,
page 4-2, for examples.

Reductions to FMV. The deduction based on FMV of property
may be reduced depending on whether the property given to
charity is ordinary income property or capital gain property.

• Ordinary income property. Deduction equals FMV minus the
amount that would be ordinary income or short-term capital
gain if the property were sold. Examples include inventory,
works of art created by the donor, and capital assets held for
one year or less. This rule limits the deduction for ordinary income
property to its basis.

• Capital gain property. Property that results in long-term capital
gain if the property were sold at a gain. Examples include
stocks and bonds held long-term and personal items such as
clothes, furniture, and automobiles. Deduction equals FMV.

The deduction is reduced by the amount of appreciation if any
of the follow is true:

– The property is contributed to certain private non-operating
foundations (not including qualified appreciated stock).

– The 50% AGI limit is used instead of the special 30% AGI
limit.

– The contributed property is tangible personal property that
is put to an unrelated use by the charity, such as a painting
donated to a charity that immediately sells it after receiving it
from the donor.

Exception: Fair market value of a contribution is not reduced if
the ordinary income or capital gain is included in the taxpayer’s
income in the same year as the contribution. An example would be
the donation of an installment note to a qualified organization.

Exception: Fair market value may be reduced for donations of
motor vehicles, boats, and airplanes. See Vehicles, Boats, and Airplanes,
page 4-20.

[taxmandan]

A timely discussion

Have a returning client who wanted to claim a donation of $18,500 for a log skidder he gave to a museum. Even had the museum curator sign off on an appraisal for that amount. Paperwork in his file showed he bought it for $2,760. Unfortunately he bought it in April 07 and donated Dec 07 so it is ordinary income property and he only gets the basis. He is furious that his great tax avoidance scheme won't work. So far has refused to sign the 8879 to file the return, wants to consider his options says he. I'll be dropping him as a client this week.