Is personal property inherited and then donated to qualified charities deductible from my federal\state taxes ?

[MinhT · Accepted solution]

Yes, if you donate inherited property to a qualified charity, you can deduct it as Charitable contributions.

The items donated must be valued at their fair market value (FMV) at the time of donation.

Please see this IRS document:

https://www.irs.gov/taxtopics/tc506

[prepskyufr]

great help - thank you

[Opus 17]

I'm just seeing this old answer and it is partly incorrect.

The donation value of personal property depends on what the charity will use it for.  If the property will be used for a related purpose (a chair to be used as a chair by the charity, a painting to be hung on the wall, etc.) then the donation value is the fair market value.

If the property will be used for an unrelated purpose (unrelated to the nature of the property -- usually this means the property will be sold to raise money for other charitable purposes), then the donation value is your cost basis or the present FMV, whichever is lower.  

For most personal property, the cost basis is what you paid for it.  For inherited property items only, your cost basis is the FMV on the date of the previous owner's death.

Putting these 3 rules together means that for inherited property only, the donation value will be either the FMV on the date of the donation or the FMV on the date the previous owner died.  But for all other personal property (property you bought or was gifted to you) you have to consider the FMV, how the charity will use it, and how much you paid for it originally. 

[jp_19501]

Dear Opus 17: Thanks for your post. I have a conservation easement donated to a non profit land trust. I am trying to figure out the 8283 and a question came up. About 60% of this contagious land was inherited 40+ years ago and the remainder purchased at later dates. Does this mean that I have to use the basis of the inherited land 40 year ago for the noncash contribution this tax year?

In the recent appraisal, the appraiser determined the fair market value with and without the conservation easement donation. Is the net difference number what you put in on the 8283 Section B. part 1 line 3(C), "Appraised fair market value"?  

I am a tax rookie and apologize in advance if this narrative doesn't make sense.  I am very grateful for any help you could give.    

[Poqtaxes]

I don't see Fair Market Value (FMV) as a choice when working on my 2020 taxes.  If the inherited property was donated to Goodwill, can I use Thrift Shop Value?  If not, what is FMV currently listed as in TurboTax?

[Opus 17]

@Poqtaxes 

Thrift shop value is fine. All of those options are different ways of determining what the fair market value is.

[Opus 17]

@jp_19501 

there are special rules for conservation land. Did you donate an easement or the entire physical property? I will have to do additional research on this. You can also check publication 526.

https://www.irs.gov/publications/p526

[Opus 17]

@jp_19501 

First of all, you cannot deduct the entire value of the land unless you donated the land itself. If you donated a conservation easement, you can only deducted the value that your property is reduced by the used restriction. There is more information on this in IRS publication 561.

https://www.irs.gov/forms-pubs/about-publication-561

IRS publication 526 describes the rules for contributing property that has increased in value. For real property, you are generally allowed to deduct to the fair market value, regardless of basis.  However, if you are only donating an easement, then your donation value is the amount by which the fair market value is reduced by the easement. This may require a special appraisal and not just a general appraisal.

for example, if you owned 50 acres of mixed forest land, it has a certain market value based on whatever restrictions currently exist on that land. If you donate a conservation easement so that the land can only be used for hunting and fishing and wildlife trails and so on and cannot be sold for a subdivision, then you have reduced its value but you have not donated the full value because you still own it. The reduction in value is the amount of your donation.  And of course, if you claim a reduction in value that is more than $5000, you must have an appraiser and a financially responsible official from the conservation organization sign your form 8283. After you e-file your tax return, you must mail the are signed original 8283 to the IRS.

[Opus 17]

@jp_19501 

in your case, the FMV in box C is the FMV of the donation, which in your case means the difference in appraised values with and without the easement.  You should list your actual cost basis, which is the fair market value of the inherited portion on the date the previous owner died plus the purchase price of the portions you purchased. It will not affect your deduction if the appraised value of the donation is more than your basis.

[pjoh3]

Thank you kindly for your prompt and very helpful information. You do a real service for those of us who are tax challenged, smile. 

For Form 8283, Section B, part 1, line 3 (c) is the appraised fair market value after the time the easement is gifted? Section B, part 1, line 3 (h) amount claimed as a deduction, is the difference between the appraised before donation value and appraised after donation value of the easement?

Thanks again! 

[Opus 17]

Read the instructions for form 8283. 
https://www.irs.gov/forms-pubs/about-form-8283

(c) is the FMV of the donation; in this case, the value of the donation is the difference in the appraisals.  

The instructions say (h) is not used if you have an appraisal.  

[jlr00721]

Why does Turbo Tax make us enter donations of  inherited stocks differently from other stocks?

[Cynthiad66]

Basically, tax law requires reporting it differently.  Different methods are used for determining the actual donation as opposed to the gain or loss.  Stock sales required more information and detail for capturing on Form 8949 and Capital gains and losses.

To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A. If your total deduction for all non-cash contributions for the year is more than $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.

Use Form 8949 to report sales and exchanges of capital assets. Form 8949 allows you and the IRS to reconcile amounts that were reported to you and the IRS on Forms 1099-B or 1099-S (or substitute statements) with the amounts you report on your return.

For the purchase price of inherited property, you will use the fair market value on the date of death, and fair market value is method to determine value.  This will allow you to deduct the amount that the items were worth when you donated them.

@jlr00721

[jlr00721]

One more nuance to this question.  Specifically, my mom's appreciated stocks were held in an ancient trust set up for her by her parents.  Because of the terms of the trust, when I received the stocks from the trust THE BASIS could NOT BE UPDATED!!  Therefore the Cap Gain is massive (e.g. P&G stock @ $ .75 acq 1956).  

So, is this technically "inherited"?  

What cost/acq. date do I use?    The actual basis I am subject to or date of death.?   

Your perspective very much appreciated!