Tax Accounting for Making a Significant Charitable Contribution

[colonel_biggs]

I have made a charitable contribution (in excess of $5,000) of Model A Ford parts and tools to the Model A Ford Museum.  I imagine that I would have to submit a Form 8253 with my return.  Because the number of pieces involved is no doubt in excess of several hundred, I have made up an Excel spreadsheet outlining the parts, their cost, current vendor selling prices, and their condition.

As I understand the procedure, the Museum will have to sign off on receiving the parts on the form.  Another section of the form also asks for an appraisal.  I know of no one in the industry that performs such services.  There is a well-known technical writer for one of the nation's two Model A Ford magazines.  He was involved in the transfer of the goods, and I could possibly ask him if he would be willing to give an overall assessment of the value (but not of each and every part).  Would he provide a letter, or simply write in his summary assessment on the form?  Since this is large tax return (well over 100 pages), can I still e-file the return?  Would a separate letter/form be mailed to the IRS simultaneously?

Thanks for any thoughts!

[Opus 17]

1. You can't e-file.  Turbotax no longer supports tax returns where form 8283 requires signatures.  Maybe a pro or another company.  In that case, you would e-file an electronic copy of the unsigned form 8283, and then mail the signed hard copy to the IRS with a cover sheet within 3 days.  

Also, you don't submit the detailed inventory, or the appraisal in this case, just the signed form 8283.  Although certainly retain those items in case they are needed for audit. 

2. You may have a problem with the qualifications required of an appraiser.  See the instructions for form 8283.  Your appraiser may have relevant experience, but they may not meet the letter of the rule unless they are regularly paid to do appraisals.  They also can't be a party to the transaction.  If this is literally the only person who is not a party who can attest to the value, make sure they thoroughly explain their qualifications, experience and training in the appraisal, and what standard and sources they used to determine the value of the items.   There are some other statements that must be included in the appraisal.  If they don't meet the letter of the rule, at least leave yourself in the best possible position in case of audit.

https://www.irs.gov/instructions/i8283#en_US_202312_publink62730rd0e1048

https://www.marcumllp.com/insights/new-irs-regulations-what-constitutes-a-qualified-appraisal

http://wagnerappraisal.com/IRSREQUIREMENTSFORAPPRAISERS.pdf

3. The appraiser can't be a party (the donor or the receiver of the property).  If they were "involved" such as by helping you find a recipient that wanted your parts, but they did not buy, donate or were the ultimate receiver, that should be fine. 

4. An overall assessment (but not value of each specific part) may or may not comply with the IRS regulations on the standard and practices required of appraisers, see the links above.

5. If you can't find a qualified appraiser or get an appraisal that follows the regulations, you will either have to limit your claimed value to $5000 or take your chances with an audit. 

[colonel_biggs]

Many thanks for your very detailed response!

Because of your comments pertaining to a qualified appraiser, if I decide to break up my contributions to $5,000 or less, I suppose this would have to be agreed upon by the donee as well.  The donee would have to sign Form 8283 for 2024, and then again for 2025, would it not?  However, if I limit the contribution to $5,000, I do not have to obtain an appraisal of the items, if I understand you correctly.

I have the donated items broken down in an Excel spreadsheet.  If I follow the $5,000 or less route, do I still have to provide that to the IRS as a mail-in?  The form gets saved by TT as a worksheet, but it is not e-filed, if I read the instructions correctly.  Can the tax return then be e-filed, and the listing of items be mailed in separately?

Again, thanks for your assistance.

[Opus 17]

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@colonel_biggs wrote:

Many thanks for your very detailed response!

Because of your comments pertaining to a qualified appraiser, if I decide to break up my contributions to $5,000 or less, I suppose this would have to be agreed upon by the donee as well.  The donee would have to sign Form 8283 for 2024, and then again for 2025, would it not?  However, if I limit the contribution to $5,000, I do not have to obtain an appraisal of the items, if I understand you correctly.

This gets tricky.  The IRS says that a form 8283 is required when you donate a single item or group of related items with a value over $5000.  They provide little additional guidance on exactly what that means.  I have always argued that if someone donates $3000 worth of items to Goodwill on June 1, and another $3000 of items on June 15, that is still probably one single donation in actual fact, and splitting it up to avoid the regulations is probably not going to be permitted, if audited.  

But now, you want to spread the donation over 2 years. Would that be in name only, and all the property was physically donated in 2024?  That's definitely not allowed.  You report donations when they actually happen, and if you donate everything in 2024 and only report half, you lose the other half, no ifs, ands or buts.

If you actually want to physically spread the donation over two years (half the items will not actually be transferred to the recipient until 2025), then you have a situation where you are splitting what is one donation in intention, into 2 smaller donations, to avoid the appraisal rule.  If that happened in the same year, it would be improper.  I suspect it would also be viewed as improper if it happened over 2 years, but you may want legal advice.  The IRS can apply a doctrine of "substance over form" where a transaction can be evaluated based on "what really happened", even if the paperwork shows something that is technically different.  I would be careful about splitting the donation, unless you get professional legal or tax advice.

If the value of your donation is more than $500 but less than $5000, you need a letter from the recipient that acknowledges the donation (with some specificity, and it has to have certain other language--see publication 526, but the organization should already know this).  The organization does not need to attest to the value in their letter, you do that via separate records, and you don't need any signatures on form 8283.

https://www.irs.gov/forms-pubs/about-publication-526

[colonel_biggs]

I regret my delayed response, since  I have been traveling.  Your info has been particularly useful to me.

Yes, I thought that maybe I could split the contribution, since it won't be used right away.   You obviously discourage such a move.  I went back to my 2023 return and plugged in a $5,000 contribution ( I used the Easy Step method), and was surprised to learn that it did not reduce my taxes by one bit!  My AGI and taxable income were over $200,000, so I wouldn't think th.at my donation was too large to be acceptable, or deferred to another year.  I know that a donation can't be greater than 50% , or two-thirds, of one's AGI.  If I remember correctly, the donation amount cannot be entered directly into a Form 8283.  Very confusing. 

[Opus 17]

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@colonel_biggs wrote:

I regret my delayed response, since  I have been traveling.  Your info has been particularly useful to me.

Yes, I thought that maybe I could split the contribution, since it won't be used right away.   You obviously discourage such a move.  I went back to my 2023 return and plugged in a $5,000 contribution ( I used the Easy Step method), and was surprised to learn that it did not reduce my taxes by one bit!  My AGI and taxable income were over $200,000, so I wouldn't think th.at my donation was too large to be acceptable, or deferred to another year.  I know that a donation can't be greater than 50% , or two-thirds, of one's AGI.  If I remember correctly, the donation amount cannot be entered directly into a Form 8283.  Very confusing. 

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I can't explain the results of your 2023 test without more information.  You would have to actually look at or print a copy of the form 1040 and the schedule A before and after the adjustment.  Look at the bottom line on schedule A and line 12 on form 1040.

Turbotax will use the standard deduction if your itemized deductions are less.  For 2024, the standard deductions are $14,600 for single and married filing separately, $29,200 for married filing jointly, and $21,900 for head of household.  Common itemized deductions are mortgage interest, state and local taxes (capped at $10,000), medical expenses (limited) and gifts to charity.  If you rent, or own your home without a mortgage, and don't make gifts to charity, then your maximum itemized deduction would be $10,000,  so Turbotax will use the standard deduction because no matter what your filing status is, all the standard deductions are higher than $10,000.

If you now add $5000 in a gift to charity, your itemized deduction would be $15,000, meaning you would get a very small tax deduction if you are single (because $15,000 is $400 more than the standard deduction) but if you are married, you will still use the standard deduction because it is much higher than your itemized deductions even with the donation.

I'm not aware off the top of my head of other limits on donations, other than the 60% limit you mentioned, but that would only apply if you had a significant donations.  You might also not have generated all the right paperwork if you were just fiddling around with the program, but someone would have to look over your shoulder.

You have to look at your own facts and circumstances.