Thanks for reading the 25 Days of Giving series! Plan on coming back to the blog every day from now through Christmas Day.
Tangible personal property is a fancy way of saying “stuff,” such as a painting, computer, furniture, and collectibles (excluding securities, cash, and real estate). So, if you want to donate your stuff to your favorite charity, what are the tax consequences?
Related Use
The amount of your federal income tax charitable deduction depends on the concept of “related use.” If appreciated tangible personal property is considered related to the charity’s exempt purpose, the deduction is based on fair market value (FMV) and available to the extent of 30% of your adjusted gross income (AGI).
If property is considered unrelated to the public charity’s exempt purpose, you must reduce the FMV by any amount that would have been long-term capital gain had you sold the property for its fair market value. (In short, if the FMV was greater than the basis in the property, your deduction is limited to your basis.)
To sum it up: in order for a donor of tangible personal property to be able to deduct its full FMV, the charity must use the object in a manner that is related to its (the charity’s) exempt purpose. A classic example is the gift of a piece of art, like a sculpture or painting, to an art museum.
Hypothetical
This concept of “related use” can have very profound tax consequences. For instance, assume Jill Donor owns a painting which is now worth $100,000, but Donor purchased it for only $20,000.
If Donor gives this painting to an art museum that keeps and displays the painting, Donor can deduct the painting’s full $100,000 FMV. If Donor gives the same painting to, say, a nature conservancy, which will sell the painting and use the proceeds, Donor can deduct only her $20,000 cost.
Note, that even if the object is potentially related to the charity’s mission–such as a painting given to an art museum–if the charity’s intention is to sell it upon receipt, then the gift is not for a related use and the donor’s deduction will be limited accordingly.
From our hypothetical, it doesn’t necessarily have to be gifted to a museum to be considered for a related use. In Private Letter Ruling 9833011, the IRS ruled that a gift of art to a Jewish community center would be for a related use, as the artwork had both religious and cultural significance. Also, a painting gifted to, say, a hospital may be for a related use if the hospital will display it in a common area so that it helps foster a healing environment for patients.
Takeaway
The big takeaway for nonprofits? Nonprofit boards and staffs should know and understand about “related use,” so they can recognize the issue if it arises.
The big takeaway for donors? Donors should obtain in writing the charity’s intent to use the property for a purpose related to its mission.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2015/11/ben-white-178531.jpg40166016Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-12-08 18:28:312020-05-18 11:28:4125 Days of Giving: "Related Use" in Charitable Gifts of Tangible Personal Property
Thanks for reading the 25 Days of Giving series. I’m “unwrapping” posts on various aspects of charitable giving each day through Christmas.
A less-than-obvious, but an ideal asset for charitable donations is appreciated long-term, publicly-traded stock. Before we list the benefits, let’s break down the terms.
Definitions
Appreciated simply means increased in value.
Long-term means stock held for more than one year; stock held for 366 days. A long-term capital asset is generally taxed at a lower rate.
Publicly traded stock just means a publicly held company whose ownership is dispersed among the general public in many shares of stock which are freely traded on a stock exchange or in over the counter markets.
Benefits
The benefits of charitable gifts of appreciated, long-term, publicly-traded stock are numerous.
Under federal tax law, charitable gifts of appreciated, long-term stock have a double benefit: (1) the long-term capital gain is excluded from taxable income, and (2) the charitable contribution deduction is the fair market value of the stock.
Iowa law also provides a third benefit for making a charitable gift of stock; donors can receive a state tax credit of 25% of the gift under the Endow Iowa Tax Credit Program.
As if that wasn’t enough to convince you there’s yet another benefit. The substantiation rules for gifts of donated securities are more relaxed than for gifts of other types of donated property. Gifts of publicly traded securities do not require an appraisal to document value. This is important, as non-cash gifts of more than $5,000 generally require a qualified appraisal by a qualified appraiser. (In case you were wondering, the value of gifts of publicly traded securities are based on a simple calculation: the arithmetic mean of the highest and lowest selling prices on the date of the gift.)
If you’re interested in gifting stock to a qualified charity as a part of your end of year giving, make sure you’re doing so in a way that maximizes all of your financial benefits. Or, if you’re a nonprofit leader wanting to accept gifts of stocks, don’t hesitate to reach out via email or phone (515-371-6077) if you would like to discuss further.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2015/11/freestocks-org-179204.jpg34635194Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-12-07 19:05:182020-05-18 11:28:4125 Days of Giving: 4 Huge Benefits of Charitable Gifts of Stock
Happy 25 Days of Giving Series! If you’ve been reading along throughout December so far, thank you. If you’ve happened upon the GoFisch blog just now, welcome. I hope to see you back here often.
Celebrating the holidays with children, be it family or friends’ children, can be a wonderful opportunity to “see” the magic and delight of the season through their experiences. The season of giving is also an opportune time to teach and reinforce the importance of a different kind of giving beyond the wish lists for Santa and filled stockings. Consider these few tips when teaching the future generation of philanthropists about why charitable giving is important, and how to practice charity during December…and all year round.
Think Tradition
Just like decorating cookies, trimming the tree, singing carols, or any other one of your family traditions, charitable giving can be made into an annual family affair. Incorporate this in a way that works for you and your family. One idea is instead of the traditional advent calendar in which children would usually get a small toy or candy each day give some loose change or “gift” a charitable activity you can do together. For the money, the child can collect and then at the end of the advent period have then donate their money to a cause they care about.
Visit local charitable organizations together. (Or, if that’s not accessible at least go online to the charities’ websites.) Introduce your child to what the charity does and why it’s important. Organizations whose missions align with your child’s interests are a good place to start. For instance, the kid who loves animals may be interested to know that the local animal rescue helps animals when they get lost or hurt.
Practice What You Preach: Volunteer Time
Charitable giving doesn’t just have to be monetary. When possible set up volunteer activities you can do together. However, volunteer opportunities for children can be limited, so don’t be afraid to get creative. If your kiddo loves riding her bike around the park, plan a day where you pick up trash around the park. If your son loves to help you plant flowers, see if he can help out at the community garden. Of course, youth organizations like scouting programs (for example), can be a great opportunity for your child to put charitable work into action. Kids, just like most of us, will better be able to “see” the impact of charitable giving when they experience it firsthand. (Note: volunteer time is not tax-deductible, but out-of-pocket expenses associated with volunteer work are!)
Shared Generosity
From your year-end giving charitable dollars, set aside a portion specifically for the kids to decide how to allocate. Have them brainstorm on with you and provide them with any suggestions/charities to match the causes they care about. You could also try out a matching program. Explain to them that every dollar they save throughout the year and want to donate to charity, you’ll match. If you need a colorful visual explain with Monopoly money.
How do you involve your entire family with charitable giving? I would love to hear your ideas. Remember, this doesn’t have to be your own children. If you’re a teacher or simply an involved aunt/uncle or grandparent you can still instill in children the important philosophy of why giving can be the best gift of all.
Questions about your own year-end charitable giving? Contact me by email or phone (515-371-6077) at any time.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2017/12/caroline-hernandez-469029.jpg25603840Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-12-06 02:55:452020-05-18 11:28:4125 Days of Giving: Teaching Kids About Charity
25 Days of Giving: “Related Use” in Charitable Gifts of Tangible Personal Property
Charitable Giving, NonprofitsThanks for reading the 25 Days of Giving series! Plan on coming back to the blog every day from now through Christmas Day.
Tangible personal property is a fancy way of saying “stuff,” such as a painting, computer, furniture, and collectibles (excluding securities, cash, and real estate). So, if you want to donate your stuff to your favorite charity, what are the tax consequences?
Related Use
The amount of your federal income tax charitable deduction depends on the concept of “related use.” If appreciated tangible personal property is considered related to the charity’s exempt purpose, the deduction is based on fair market value (FMV) and available to the extent of 30% of your adjusted gross income (AGI).
If property is considered unrelated to the public charity’s exempt purpose, you must reduce the FMV by any amount that would have been long-term capital gain had you sold the property for its fair market value. (In short, if the FMV was greater than the basis in the property, your deduction is limited to your basis.)
To sum it up: in order for a donor of tangible personal property to be able to deduct its full FMV, the charity must use the object in a manner that is related to its (the charity’s) exempt purpose. A classic example is the gift of a piece of art, like a sculpture or painting, to an art museum.
Hypothetical
This concept of “related use” can have very profound tax consequences. For instance, assume Jill Donor owns a painting which is now worth $100,000, but Donor purchased it for only $20,000.
If Donor gives this painting to an art museum that keeps and displays the painting, Donor can deduct the painting’s full $100,000 FMV. If Donor gives the same painting to, say, a nature conservancy, which will sell the painting and use the proceeds, Donor can deduct only her $20,000 cost.
Note, that even if the object is potentially related to the charity’s mission–such as a painting given to an art museum–if the charity’s intention is to sell it upon receipt, then the gift is not for a related use and the donor’s deduction will be limited accordingly.
From our hypothetical, it doesn’t necessarily have to be gifted to a museum to be considered for a related use. In Private Letter Ruling 9833011, the IRS ruled that a gift of art to a Jewish community center would be for a related use, as the artwork had both religious and cultural significance. Also, a painting gifted to, say, a hospital may be for a related use if the hospital will display it in a common area so that it helps foster a healing environment for patients.
Takeaway
The big takeaway for nonprofits? Nonprofit boards and staffs should know and understand about “related use,” so they can recognize the issue if it arises.
The big takeaway for donors? Donors should obtain in writing the charity’s intent to use the property for a purpose related to its mission.
I want to help you, whether you’re a nonprofit organization or donor, wisely maximize your charitable giving. Don’t hesitate to reach out by phone (515-371-6077) or email (gordon@gordonfischerlawfirm.com).
25 Days of Giving: 4 Huge Benefits of Charitable Gifts of Stock
Charitable GivingThanks for reading the 25 Days of Giving series. I’m “unwrapping” posts on various aspects of charitable giving each day through Christmas.
A less-than-obvious, but an ideal asset for charitable donations is appreciated long-term, publicly-traded stock. Before we list the benefits, let’s break down the terms.
Definitions
Appreciated simply means increased in value.
Long-term means stock held for more than one year; stock held for 366 days. A long-term capital asset is generally taxed at a lower rate.
Publicly traded stock just means a publicly held company whose ownership is dispersed among the general public in many shares of stock which are freely traded on a stock exchange or in over the counter markets.
Benefits
The benefits of charitable gifts of appreciated, long-term, publicly-traded stock are numerous.
Under federal tax law, charitable gifts of appreciated, long-term stock have a double benefit: (1) the long-term capital gain is excluded from taxable income, and (2) the charitable contribution deduction is the fair market value of the stock.
Iowa law also provides a third benefit for making a charitable gift of stock; donors can receive a state tax credit of 25% of the gift under the Endow Iowa Tax Credit Program.
As if that wasn’t enough to convince you there’s yet another benefit. The substantiation rules for gifts of donated securities are more relaxed than for gifts of other types of donated property. Gifts of publicly traded securities do not require an appraisal to document value. This is important, as non-cash gifts of more than $5,000 generally require a qualified appraisal by a qualified appraiser. (In case you were wondering, the value of gifts of publicly traded securities are based on a simple calculation: the arithmetic mean of the highest and lowest selling prices on the date of the gift.)
If you’re interested in gifting stock to a qualified charity as a part of your end of year giving, make sure you’re doing so in a way that maximizes all of your financial benefits. Or, if you’re a nonprofit leader wanting to accept gifts of stocks, don’t hesitate to reach out via email or phone (515-371-6077) if you would like to discuss further.
25 Days of Giving: Teaching Kids About Charity
Charitable Giving, NonprofitsHappy 25 Days of Giving Series! If you’ve been reading along throughout December so far, thank you. If you’ve happened upon the GoFisch blog just now, welcome. I hope to see you back here often.
Celebrating the holidays with children, be it family or friends’ children, can be a wonderful opportunity to “see” the magic and delight of the season through their experiences. The season of giving is also an opportune time to teach and reinforce the importance of a different kind of giving beyond the wish lists for Santa and filled stockings. Consider these few tips when teaching the future generation of philanthropists about why charitable giving is important, and how to practice charity during December…and all year round.
Think Tradition
Just like decorating cookies, trimming the tree, singing carols, or any other one of your family traditions, charitable giving can be made into an annual family affair. Incorporate this in a way that works for you and your family. One idea is instead of the traditional advent calendar in which children would usually get a small toy or candy each day give some loose change or “gift” a charitable activity you can do together. For the money, the child can collect and then at the end of the advent period have then donate their money to a cause they care about.
Talk About It Together
Similarly to how I counsel my estate planning clients on the importance of speaking with family members about decisions for their estate, it’s important to actually talk about charitable giving as a family. Indiana University Lilly Family School of Philanthropy conducted a study and found that children whose parents talk with them about donating are 20% more likely to give to charity than kids who do not have those conversations with their parents.
Visit local charitable organizations together. (Or, if that’s not accessible at least go online to the charities’ websites.) Introduce your child to what the charity does and why it’s important. Organizations whose missions align with your child’s interests are a good place to start. For instance, the kid who loves animals may be interested to know that the local animal rescue helps animals when they get lost or hurt.
Practice What You Preach: Volunteer Time
Charitable giving doesn’t just have to be monetary. When possible set up volunteer activities you can do together. However, volunteer opportunities for children can be limited, so don’t be afraid to get creative. If your kiddo loves riding her bike around the park, plan a day where you pick up trash around the park. If your son loves to help you plant flowers, see if he can help out at the community garden. Of course, youth organizations like scouting programs (for example), can be a great opportunity for your child to put charitable work into action. Kids, just like most of us, will better be able to “see” the impact of charitable giving when they experience it firsthand. (Note: volunteer time is not tax-deductible, but out-of-pocket expenses associated with volunteer work are!)
Shared Generosity
From your year-end giving charitable dollars, set aside a portion specifically for the kids to decide how to allocate. Have them brainstorm on with you and provide them with any suggestions/charities to match the causes they care about. You could also try out a matching program. Explain to them that every dollar they save throughout the year and want to donate to charity, you’ll match. If you need a colorful visual explain with Monopoly money.