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Regarding Charitable Contributions of Property other than Cash or Stock THE FOLLOWING summary of the U.S. tax laws concerning charitable contributions was recently commissioned by the Caliph. It was prepared by a qualified C.P.A. in New York, who was asked to elucidate the subject without bogging down in technical references and jargon -- in this he succeeded pretty well. Its publication here cannot serve in place of counsel of ones' own tax accountant or attorney, but is nevertheless a useful guide to how to help the Order without unnecessary sacrifice. -- Ed. Individual's Charitable Contributions An individual is allowed a deduction from his gross income for contributions to or for thed use of a charitable, religious, educational, public or scientific organization or the United States or other governmental unit specified. To be deductible the gift must be made by the taxpayer. There is a deduction ceiling on an individual's contributions. The maximum deduction for gifts is 50% of adjusted gross income for contributions to (but not for the use of) most public charities and even some private foundations. Substantiating Charitable Contributions Certain information must be furnished in the income tax return to support a deduction for contributions. A corporate or individual taxpayer making a charitable contribution of money must keep a cancelled check or a receipt or, in the absence of a cancelled check or receipt, other reliable written records showing the name of the donee, the date of the contribution, and the amount of the contribution. A letter or other communication from the donee acknowledging receipt of the contribution and showing the date and amount of the contribution constitutes a receipt. The regulations indicated that this information may have to be reported on a taxpayer's return where required. The regulations also require a corporate or individual taxpayer making a charitable contribution of property other than money to have a receipt from the donee charitable organization and a reliable written record of specified information with respect to the donated property. The receipt must include the name of the donee, the date and location of the contribution, and a description of the property in detail reasonable under the circumstances, including the value of the property, in cases where it is impractical to obtain a receipt (such as leaving property at charity's unattended drop site), the taxpayer is nevertheless required to maintain a reliable written record of specified information with respect to each item of donated property. A reliable written record should include the following information: 1. name and address of the donee organization. 2. date and location of the contribution, 2. a description of the property in reasonable detail, including the value of the property at the time the contribution was made, method used to determine that value and a signed copy of any appraisal obtained, 2. in the case of ordinary income property, the cost or basis of the property, 2. if less than the entire interest in the property is contributed, the total amount claimed as a deduction for the tax year and for prior years and the name of any person other than the donee organizaiton that has actual possession of the property, 2. The terms of any agreement entered into by the taxpayer relating to the use, sale, or other disposition of the contributed property. Moreover, where a taxpayer claims a charitable contribution deduction in excess of $500 with respect to property, the taxpayer must also maintain a written record as to (1) the manner of acquisition (e.g., by purchase) and the approximate date of purchase or manufacture and (2) the cost or other basis of property held less than six months and, where available, similar information for property held six months or more. Contributions of Property Generally, the deduction for gifts of property is measured by the fair market value, which is defined as the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell, and both having reasonable knowledge of the relevant facts. However, limitations apply to the contribution of appreciated property, and the amount of the deduction may be subject to reduction. Whether there is a reduction, and how much of a reduction there is, depends on the type of property donated (ordinary income or capital gain property), the donee of the property, and the use to which the property is put. Fair Market Value The income tax regulations dealing with charitable contributions jare silent as to whether property must be valued on a bulk or an individual basis and as to the market that should be used. Where these issues arose, the Tax Court looked to the federal estate and gift tax regulations. Those regulations indicate that the fair market value is to be determined by the sale price of the item in the market in which such an item is most commonly sold to the public. Appraisals Temporary regulations have been issued that apply to contributions of property and publicly traded securities if the aggregate claimed or reported value of such items of property (and all similar items of property for which deductions for charitable deductions are claimed or reported by the same donor for the same taxable year whether or not donated to the same donee) is in excess of $5,000. The temporary regulations apply to deductions claimed by an individual, closely held corporation, or personal service corporation for charitable contributions of such property made after 1984. To substantiate such a contribution, the donor must obtain a qualified appraisal and attach an appraisal summary to the return on which a deduction for such contribution is first claimed, in addition to complying with the general substantiation requirements. In the case of nonpublicly traded stock, the claimed value of which exceeds $5,000 but does not exceed $10,000, the donor does not have to obtain a qualified appraisal and can file an abbreviated appraisal summary. A qualified appraisal is an appraisal document that: 1. relates to an appraisal that is made not earlier than 60 days prior to the date of contribution of the appraised property; 2. is prepared, signed and dated by a qualified appraiser; 2. does not involve a prohibited type of appraiser fee, such as when a part or all of the fee arrangement is based on a percentage (or set of percentages) of the appraised value of the property (except for certain fee arrangements with not-for-profit associations that regulate appraisers, and 2. includes the following information: a) a description of the property, a) in the case of a tangible property, the physical condition of the property, a) the date of contribution, a) the terms of any agreement entered into by the donor which relates to the use, sale or other disposition of the contributed property, a) the name, address, and taxpayer identification number of the qualified appriasier and the appraiser's employer or partnership. Value of an article may be substantially higher than the amount or amounts received by the charity, and a deduction can be claimed for the higher value. In such cases, an appraisal may be in order.