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How to Put a Value on Donated Property

Date: September, 2016

Donating noncash property valued at more than $5,000 to a charitable organization generally requires a qualified appraisal that meets IRS guidelines.* Fair market value is the price that property would sell for on the open market. Its principles — willing buyer and willing seller, no compulsion to buy or sell, and reasonable knowledge of the relevant facts — remain mainstays of the valuation rules. However, the IRS cites other factors that may be considered in making the determination.

Cost or selling price. The price paid for an item can be an accurate measure of fair market value when the transaction and the donation dates are close and no change has occurred that would affect the item’s value.

Sales of comparable properties. Sales prices of comparable properties may be used to help determine value based on the degree of similarity of the property, the time between the sale and the donation, and the sale conditions.

Replacement cost. The cost of buying property similar to the donated item may be a consideration. An appropriate amount for depreciation must be deducted.

Opinions of experts. The expert should be knowledgeable and competent, and his or her opinion should be thorough and supported by facts.

Choosing a Qualified Appraiser

A qualified appraiser is someone who

  • Has earned an appraisal designation from a recognized organization or has met certain education and experience requirements.
  • Regularly prepares appraisals for a fee.
  • Is not an “excluded individual.” In general, this would include: the donor; the donee; a person who sold, exchanged, or gave the property to the donor or acted as a transfer agent; or a person “related to” any of the above. (Other exclusions apply.)

A qualified appraisal must be signed and dated. The appraisal must be made no earlier than 60 days before the valued property is donated.

For more help with individual or business taxes, connect with us today. Our team can help you with all your tax issues, large and small.

 

* IRS Publication 561, Determining the Value of Donated Property

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