These Validation Reports help you make contributions of Business Interests, Real Estate, and Marketable and non-Marketable Securities, and require unique valuation considerations.
Generally, noncash charitable contributions from individuals to charitable organizations are tax deductible at Fair Market Value.
- If the value of the noncash charitable contribution is more than $250:
You must have the noncash charitable contributions substantiated by a contemporaneous written acknowledgment. Generally, the acknowledgment must include the amount of cash, a description of the noncash charitable contributions, and a description and good-faith estimate of the value of any goods or services received for the noncash charitable contributions.
- If the FMV of the noncash charitable contribution is more than $500:
You must also fill out Section A of IRS Form 8283, Noncash Charitable Contributions.
- If the FMV is more than $5,000, and not all marketable securities held by the entity making the gift:
You must also have an appraisal done, fill out Section B of Form 8283 and attach it to your tax return.
We comply with the IRS requirements of appraiser certification.
Tax-Advantaged Giving for Business Owners
Appreciated holdings for more than one year: If you own a company, whether in the form of C corporation stock or subchapter S stock, or a large block of public stock (free-trading or restricted), these stocks probably have appreciated if they have been held by you for more than one year.
By making a transfer of such stock to a charity, you would be eligible for a charitable tax deduction based on the fair market value of the stock and would avoid any potential capital gain tax on the appreciated value of the stock. Should you wish to gain control of the stock at some future time, you or the corporation may be able to buy it back, thus establishing a new cost basis for the stock. In keeping with IRS guidelines, there can be no obligation on the part of the donor or the charitable organization to buy or sell back the property at the time of the gift; otherwise the gain will be taxed to the donor.
Short-term holdings: It is generally inadvisable to give a charity securities in which your capital gain is short-term (i.e., securities that you have owned for less than 12 months). In such cases, the deduction will be for the cost basis of the securities, not the current market value.
Securities with a built-in loss: Rather than give a charity property in which you have a capital loss, you should sell them, establish a deductible capital loss, and then contribute the proceeds to the charity.
Contribution is made by a partnership or S corporation: If the noncash contribution is made by a partnership or S corporation, the reporting requirements are applied at the partnership or S corporation level, except that charitable deductions at the partner or shareholder level require compliance with the reporting requirements by the partnership or S corporation.
Limitation: There is a limit on how much of an individual or a company can deduct as charitable gifts in a given tax year. Excess of your charitable contributions may be carried forward to future years. You should consult your expert tax preparer for limitations to your situation.