If you make or receive charitable contributions regularly, you may be aware that charitable contributions of property in excess of $5,000 require that you attach an appraisal to your tax return. In response to gross valuation misstatements, the IRS has recently issued guidance on the definition of a qualified appraisal and qualified appraiser.
The IRS has determined that a qualified appraisal is one that is conducted by a qualified appraiser in accordance with generally accepted appraisal standards. A qualified appraiser is an individual who:
- Has earned an appraisal designation from a recognized professional appraisal organization or has otherwise met the minimum education and experience required by the IRS;
- Regularly performs appraisals for which the individual receives compensation;
- Demonstrates education and experience in valuing the type of property subject to the appraisal; and
- Has not been prohibited from practicing before the IRS at any time during the three years prior to the appraisal.
In addition, the appraisal must be made not more than 60 days before the date the appraised property is contributed to a charitable organization, and not later than the time it must be received by the donor.
Regardless of the substantiation requirements, gifts of appreciated property remain a valuable tax planning tool, as they have a double tax savings advantage. You can claim a charitable contribution deduction for the full appreciated value of the property, and you can avoid the capital gains tax that you would have paid had you sold the property.
However, to insure that you get the full advantage of the value of the appreciated property, it is important to recognize the IRS requirements regarding the appraisal and plan accordingly. We can assist you in planning for your charitable contributions. Please contact us at your earliest convenience to arrange an appointment.