IRS Donation Regs (short)
We are not attorneys and are expressing our experienced
opinions within these answers.
If you are concerned, please contact an attorney for clarification.
IRS text is black and bold
Citation of publication links to the IRS page
*Author’s comments are green and italic
Fair market value.
Fair market value (FMV) is the price at which the property would change hands between a buyer and a seller when both have reasonable knowledge of all the necessary facts and neither has to buy or sell.
Publication 544 – Sale and Other Dispositions of Assets – * look on page 3
*You will be taken to the IRS website and document. There is no link to the specific text.
Appraisals
Appraisals are not necessary for items of property for which you claim a deduction of $5,000 or less.
Publication 561 – Determining the Value of Donated Property – * look on page 8
* You will be taken to the IRS website and document. There is no link to the specific text.
*Anything above the $5,000 claimed deduction requires a licensed appraisal. For one thing, this essentially gets you off the hook if it’s later determined untrue. You relied on a licensed professional.
“Appraisal Requirements
The appraisal must be made by a qualified appraiser (as defined on page 6) in accordance with generally accepted appraisal standards.”
“If you had to get an appraisal, you must get it from a qualified appraiser.”
“In addition, the appraiser must complete Part III of Form 8283.
In general, there are three main approaches to the valuation of real estate. An appraisal may require the combined use of two or three methods rather than one method only.
1. Comparable Sales
The comparable sales method compares the donated property with several similar properties that have been sold.
For each comparable sale, the appraisal must include the names of the buyer and seller, the deed book and page number, the date of sale and selling price, a property description, the amount and terms of mortgages, property surveys, the assessed value, the tax rate, and the assessor’s appraised FMV.
*Ebay or ANY auction at $1 is NOT a legal comparable sale.
Only comparable sales having the least adjustments in terms of items and/or total dollar adjustments should be considered as comparable to the donated property.
*Taking the majority of legal comparable sales, those farthest from the norm are least considered and since the majority of sales for any resort are those sold BY the resort, the retail price is closest to the norm, not some eBay price which is not usable.
2. Capitalization of Income
This method capitalizes the net income from the property at a rate that represents a fair return on the particular investment at the particular time, considering the risks involved.
*This method does not apply.
3. Replacement Cost New or Reproduction Cost Minus Observed Depreciation
This method, used alone, usually does not result in a determination of FMV. …this reasoning does not apply if a similar property cannot be created because of location, unusual construction, or some other reason. Generally, this method serves to support the value determined from other methods.
Once sold for any price, where and at what cost would the original owner have to reasonably quickly find a replacement of unit, date, and terms? The only legitimate source is the direct resort sales and it’s retail prices.
Unusual Market Conditions
For example, liquidation sale prices usually do not indicate the FMV. Also, sales of stock under unusual circumstances, such as sales of small lots, forced sales, and sales in a restricted market, may not represent the FMV.
*In other words, those sales made when an owner simply says, “Get me out at anything you can get. FAST!” don’t have to be considered indicative of FMV.
Publication 561 – Determining the Value of Donated Property – * look on page 6 – Real Estate
* You will be taken to the IRS website and document. There is no link to the specific text.
Purpose of Form
Donee organizations use Form 8282 to report information to the IRS and donors about dispositions of certain charitable deduction property made within 3 years after the donor contributed the property.”
IRS Form 8282 – Donee Information Return (Sale, Exchange, or Other Disposition of Donated Property) – * look on page 3
* You will be taken to the IRS website and page. There is no link to the specific text.
*This is the best reference to timing of FMV and sale price. The IRS is specific in saying that an estimation of FMV can stand, but is automatically changed if there is a resale within 36 months.
*For several years there has been news regarding different companies under investigation for illegal activity concerning timeshare transfers. Each time they have been due to non-compliance with the IRS regulations, usually concerning an appraisal above the $5,000 granted by the IRS or resale within the required 36 months, or illegal resale schemes. Please do your own research for concerns to find out what such companies were doing illegally. We work hard to make sure we are legal in everything we do.