Non-Cash charitable donations: Is $5000+ FMV trigger per donation or per year?

[Davesilb]

Suppose I have a collection of rare baseball cards that I want to donate to a qualified charity and claim a FMV of $12,000 on my return. My understanding is that, because this exceeds $5000, I need a professional appraisal. However, does that $5000 cutoff apply to the combined FMV of all like items I donate to the same charity over the course of the year, or only to a discrete donation of items on a particular date? If I break the cards into three groups with FMV of $4000 each and donate a group in June, August, and November and itemize these separately on my return, can I forego a professional appraisal, or will the IRS regard this as no different from donating them all at once with a $12k FMV?

[Opus 17 · Accepted solution]

It's per tax return.  If you show a tax return for 2024 with more than $5000 of non-cash donations, the IRS is going to take a closer look.  

[pk]

@Davesilb , while agreeing with my colleague @Opus 17 , just wanted to add that  available deduction for in-kind donations  amount is the lower of the basis  ( cost of acquisition  plus other allowable costs ) and FMV at the time of donation.  There is also AGI based limitations on  charitable contributions recognition for the tax year.   A very good source  is IRS pub 526.

[Opus 17]

As noted, the amount you can claim as a deduction for items of tangible personal property that have increased in value is your original cost, not the current fair market value.  The only time a donation of baseball cards would have a deductible value equal to the present fair market value is if you donated them to a museum or similar charity that would keep them as cards (keep and use them for their intended purpose) for their charitable purposes.  If the charity is going to sell the items, your deduction value is limited to your original cost.  You may be better off selling them yourself, reporting and paying the capital gains tax, and then donating some or all of the money.

And naturally, you would need records of your original cost if audited, and if you claim a value of more that $5000 even for the original cost and not the FMV, you need an appraisal.  (The appraisal might say the current FMV is $15,000, but you would still only claim your cost if that was less.)

See publication 526, under "donations of property that have increased in value."

https://www.irs.gov/pub/irs-pdf/p526.pdf

[Davesilb]

Thank you for mentioning this. I was aware of the related use test but had always imagined it would be satisfied in situations where a "Friends of" charity regularly raises money for an arts or other organization by selling donated collectibles at public auction. After reading up some more, it seems I was probably mistaken. Most of the examples of related use I find involve displaying the items in a museum or school. The unrelated use examples are all about the charity selling the donated items.

I feel there's still some ambiguity because I can't find any distinction made between a charity selling a donated item because they can't find a use for it (rare books donated to a pet shelter) and charities like Goodwill whose primary activity is soliciting and selling donated items. 

[Opus 17]

You may be interested in IRA form 8282.

https://www.irs.gov/pub/irs-pdf/f8282.pdf

This form is used by charities to report when they dispose of large gifts that were previously reported by the taxpayer on form 8283.  If the organization disposes of an item within 3 years of the date of receipt, they must report that to the IRS, along with an explanation of whether or not the organization's use of the item furthered it's exempt purpose or function.  If an organization accepts your large donation on a form 8283 and you report it on your tax return, and then the organization disposes of the item in less than 3 years, this fact must be reported to you and the IRS and may trigger a requirement for you to amend your return due to the unrelated use rule.

Here, the key words are "describe how the organization’s use of the property furthered its exempt purpose or function."  If a pet rescue charity accepts your donation of rare books, it would be hard to see how that donation would "further their exempt purpose or function" except by fundraising. 

For an example of an organization that accepts an item the "furthers its exempt function" and then later has to dispose of it because its use became unfeasible, you can think about someone who donates a van to Meals on Wheels, where the charity plans to keep the van and use it for picking up and delivering food and meals. That would be a related purpose.  If they were forced to sell the van after 6 months because the frame was rusted beyond repair, that would be a case where they had accepted the donation for a related purpose but were later forced to sell for other reasons.  (In contract to the donation of, say, a motor cycle, where it could never really be expected to "further the exempt purpose" of the organization and was always destined for sale one way or the other.  

Lastly, note that where form 8283 must be signed by an official of the charity, it is this official who must certify if the item will be put to a related or unrelated use.  The official also agrees to file form 8282 if the organization disposes of the property within 3 years.  So it is not you who decides if the use is related, it is the charity.  (And the charity can lose their tax-exempt status if they abuse the rules.) 

https://www.irs.gov/pub/irs-pdf/f8283.pdf