You may think that beingeligible for the charitable tax deduction is as simple as making your gift andthen claiming the deduction. Not so. Inorder to qualify, there are important steps to take regarding documentation andvaluation of your gift.
Fundamentally, you need to provethe value of what you have given, but that can get complicated when you aregiving in the form of things. Youneed an appraisal of any thing yougive (e.g., art, a house, an easement, or a service), and you need thatappraisal to answer all the tax manâ€™s questions even before he asks them. Inshort, appraisals can get tricky.
For example, if you give art youneed an art appraiser, and if you give real estate you need a real estateprofessional. However, what if you give interest or stock in a company? Thenthe appraisal becomes even trickier.
When you are giving less thanobviously valued interest, then you might want to consider the advice given ina recent Forbes article titled â€œIt's Hard To Satisfy The Qualified AppraisalRequirement For A Charitable Contribution If You Appraise The Wrong Property.â€ The problem with interest or stock ina company is that the interest or stock is different than the things the company owns. So, 10% of thestock in a company with $5 million in assets is not (necessarily) equivalent to10% of $5 million. Such is the case, even when the sole purpose of the companyis to hold well-documented and appraised assets worth $5 million.
In a â€œsimple case,â€ the IRSlikely will provide leniency and determine that such and such an appraisal wasâ€œsubstantially compliantâ€ if not fully so. Nevertheless, the greater thebusiness complexity, the greater the risk of misstep and attending (and costly)determination of insubstantial compliance.
To avoid any questions beingraised about your gift, obtaining an appraisal is anessential step when recognizing the tax implications of any transfer ofproperty that is more than simply money itself. At Idaho Estate Planning we have a large network of resources to help you accomplish your goals. Call us today for a consultation and let's get to work for you and your loved ones. Remember, good planning is no accident.