As we enter the giving season and begin making charitable contributions it is important to remember that some gifts require more than just the act of giving to qualify for a charitable tax deduction. For monetary contributions made by cash, check, credit card or other electronic funds transfer, the donor must obtain and keep a bank record or a written communication from the done organization. If the monetary donation is $250 or more, the donor must obtain and keep a contemporaneous written acknowledgment from the done organization.
Gifts of property other than cash or marketable securities with a value of $5,000 or more must be substantiated by a “qualified appraisal” prepared by a “qualified appraiser.” The Treasury Regulations contain very detailed requirements for what constitutes a “qualified appraisal” and “qualified appraiser” and failure to meet those requirements can result in disallowance of the charitable tax deduction.
Taxpayers must include an appraisal summary on Form 8283 with their income tax return and if the gift is $500,000 or more they must attach a copy of the appraisal to their return. The IRS interprets the qualified appraisal and appraiser requirements very narrowly and frequently denies charitable deductions on the basis of very technical or slight inefficiencies in appraisals. These denials have been challenged in court and in a number of cases the courts have ruled in favor of the IRS. Compliance with these requirements is necessary to receive the benefit of the charitable tax deduction so it is important to have an understanding of the requirements.