Posts

happy new year fireworks

Happy New Year! It’s 2018 and if you’re like me, “Auld Lang Syne” was playing merrily in the background as a cup of cheer was raised and confetti fluttered on New Year’s Eve. The title and main chorus of song ubiquitous with the holiday roughly translates to “for old times’ sake.” On that note I’ve spent some quality time (like the song eludes to) reminiscing about the year that’s gone by. I’ve reviewed what Gordon Fischer Law Firm tackled in 2017, but more importantly I’m looking ahead to where we want to go, how to get there, and how to improve along the way. I have a few “resolutions” I want to share…resolutions we actually intend to keep! These goals will work to further advance the mission of the firm “to promote and maximize charitable giving in Iowa.”

new year sparkler

At Gordon Fischer Law Firm we fully intend to:

  • Post even more regular content on the GoFisch blog to make it ever easier for both donors and donees to effectuate charitable giving to/for their favorite causes.
  • Continue growing the monthly GoFisch newsletter (have you subscribed?).
  • Additionally, I would like to produce a regular specific newsletter for professional advisors (accountants, financial advisors, insurance agents, and fellow lawyers) with smart planning information to be able to further help Iowans.
  • Present an all-day seminar (for continued education credits) targeted to both nonprofit leaders and professional advisors to discuss all aspects of charitable giving and facilitate beneficial networking.
  • Continue demystifying estate planning for all Iowans—complete with basic forms to help that process along.

Tomorrow I’ll highlight aspects of estate planning and charitable giving you can (and should) incorporate into your goals for 2018. Do you already have such goals in mind? A few examples could be to stop making excuses to avoid estate planning, finally establish that living trust, or consult with a professional about a retained life estate. Don’t hesitate to contact me to discuss. Together we’ll likely be able to set a plan in place for you to achieve your goals (or resolutions) to truly make 2018 your best year yet.

lights on roof

Thanks for reading the 25 Days of Giving series where we’re “unwrapping” important info on various aspects of charitable giving each day through Christmas. Share with friends, family, & colleagues to inspire others to to also make meaningful gifts this season.

If you’re making a non-cash charitable donation of over $5,000, first off, high five! That’s going to go a long way toward helping your favorite charity or advancing a cause you feel passionate about. Because you’re a smart donor, you’re also probably planning to claim the federal income tax charitable deduction as a way of reducing your taxes. In order to do this, gifts of that size come with specific requirements from the IRS that you’ll want to be sure to meet.

Requirements for “qualified appraisal” and “qualified appraiser”

Non-cash gifts of more than $5,000 in value, with exceptions, require a qualified appraisal completed by a qualified appraiser. The terms “qualified appraisal” and “qualified appraiser” are very specific and have detailed definitions according to the IRS.

Qualified appraisal

pens and papers

A qualified appraisal is a document which is:

  1. made, signed, and dated by a qualified appraiser in accordance with generally accepted appraisal standards;
  2. timely;
  3. does not involve prohibited appraisal fees; and
  4. includes certain and specific information.

Let’s further examine each of these four requirements.

“Qualified appraiser:” Appraiser education and experience requirements

An appraiser is treated as having met the minimum education and experience requirements if she is licensed or certified for the type of property being appraised in the state in which the property is located. For a gift of real estate in Iowa this means certification by the Iowa Professional Licensing Bureau, Real Estate Appraisers.

Further requirements for a qualified appraiser include that s/he:

  1. regularly performs appraisals for compensation;
  2. demonstrates verifiable education and experience in valuing the type of property subject to the appraisal;
  3. understands she may be subject to penalties for aiding and abetting the understatement of tax; and
  4. not have been prohibited from practicing before the IRS at any time during three years preceding the appraisal.

Also, a qualified appraiser must be sufficiently independent. This means a qualified appraiser cannot be any of the following:

  1. the donor;
  2. the donee;
  3. the person from whom the donor acquired the property [with limited exceptions];
  4. any person employed by, or related to, any of the above; and/or
  5. an appraiser who is otherwise qualified, but who has some incentive to overstate the value of the property.

Timing of appraisal

watch on wrist

The appraisal must be made not earlier than 60 days prior to the gift and not later than the date the return is due (with extensions).

Prohibited appraisal fees

The appraiser’s fee for a qualified appraisal cannot be based on a percentage of the value of the property, nor can the fee be based on the amount allowed as a charitable deduction.

Specific information in required in appraisal

Specific information must be included in an appraisal, including:

  1. a description of the property;
  2. the physical condition of any tangible property;
  3. the date (or expected date) of the gift;
  4. any restrictions relating to the charity’s use or disposition of the property;
  5. the name, address, and taxpayer identification number of the qualified appraiser;
  6. the appraiser’s qualifications, including background, experience, education, certification, and any membership in professional appraisal associations;
  7. a statement that the appraisal was prepared for income tax purposes;
  8. the date (or dates) on which the property was valued;
  9. the appraised fair market value on the date (or expected date) of contribution;
  10. the method of valuation used to determine fair market value;
  11. the specific basis for the valuation, such as any specific comparable sales transaction; and
  12. an admission if the appraiser is acting as a partner in a partnership, an employee of any person, or an independent contractor engaged by a person, other than the donor, with such a person’s name, address, and taxpayer identification number.

Appraiser’s dated signature and declaration

signature on paper

Again, a qualified appraisal must be signed and dated by the appraiser. Also, there must be a written declaration from the appraiser she is aware of the penalties for substantial or gross valuation.

Reasonable cause

Tax courts have held that a taxpayer’s reliance on the advice of a professional, such as an attorney or CPA constitutes reasonable cause and good faith if the taxpayer can prove by a preponderance of the evidence that: (1) the taxpayer reasonably believed the professional was a competent tax adviser with sufficient expertise to justify reliance; (2) the taxpayer provided necessary and accurate information to the advising professional; and (3) the taxpayer actually relied in good faith on the professional’s advice.

If this sounds like a lot, know you don’t have to navigate these requirements just by yourself. Contact me at any time to discuss your situation and charitable giving goals. We’ll figure out the best course of action together.

Hands giving ornament

Thanks for reading the 25 Days of Giving series! Plan on coming back to the blog every day from now through Christmas Day.

25 days of Christmas - Holiday giving

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 appreciated property is considered related to the public charity’s exempt purpose, the deduction is based on fair market value and available to the extent of 30% of the donor’s contribution base. 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? The donor 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).

There are several provisions that just about all employee handbooks should include. Let’s simply cover the top five. There are certainly numerous other important provisions to include in an employee handbook, but these five are critical and provide important protections for employers (both nonprofit and for-profit).

The employee handbook should make it clear it is NOT a contract. The employee handbook needs a “disclaimer.”

Under Iowa law it’s critically important to point out that the employee handbook is just that–a handbook–and not an employment contract. And, the employee handbook should not make any promises about continued employment. Consider using language similar to this:

I understand and agree that nothing in the Employee Handbook creates, or is intended to create, a promise or representation of continued employment and that employment at [Nonprofit/Company] is employment at will, which may be terminated at the will of either [Nonprofit/Company] or myself. Furthermore, I acknowledge that this handbook is neither a contract of employment nor a legal document.

https://www.gordonfischerlawfirm.com/employee-handbook/

The employee handbook should make clear it trumps other, older policies and provisions. The employee handbook needs a “superseding” provision.

The employee handbook should make clear that it includes the most up-to-date guidance on company policies. Wording like this may be helpful:

This handbook and the policies and procedures contained herein supersede any and all prior practices, oral, or written representations, or statements regarding the terms and conditions of my employment with [Nonprofit/Company]. By distributing this handbook, [Nonprofit/Company] expressly revokes any and all previous policies and procedures that are inconsistent with those contained herein.

The employee handbook should make clear it is subject to change. It needs “wiggle room” language.

 

Paperwork on table

The policies in the handbook may well be subject to change. Of course, new issues arise, and you may need to make revisions. Consider using something like the following:

I understand that, except for employment-at-will status, any and all policies and practices may be changed at any time by [Nonprofit/Company], and [Nonprofit/Company] reserves the right to change my hours, wages, and working conditions at any time. All such changes will be communicated through official notices, and I understand that revised information may supersede, modify, or eliminate existing policies.

The employee handbook should make clear that employees are “at will.”

The employee handbook must be unambiguous about employees’ at will status:

Your employment is not for any specific time and may be terminated at will with or without cause and without prior notice by [Nonprofit/Company].

The employee handbook should contain an acknowledgement page.

 

Paper and computer

It is important the employee handbook includes an acknowledgment page that the employee signs and returns. The acknowledgement page should state that the employee understands it is his or her responsibility to read and follow the policies. The acknowledgement page should also be able to be separated from the handbook, so that it can be signed by the employee and saved in the employee’s personnel file. Wording like this might be helpful:

I have received the handbook, and I understand that it is my responsibility to read and comply with the policies contained in this handbook and any revisions made to it.

________________________________________
Employee’s Signature

________________________________________
Employee’s Name (Print)

____________________
Date

TO BE PLACED IN EMPLOYEE’S PERSONNEL FILE


Does your employee handbook contain these five provisions? Why or why not? I’d love to hear from you. Give me a call at 515-371-6077 or email me at gordon@gordonfischerlawfirm.com.

Financials in book

What is a financial power of attorney?

A financial power of attorney is a legal document that designates someone to handle your financial decisions on your behalf.

What happens if I don’t have a financial power of attorney?

If you do not have a power of attorney and you were to become incapacitated, any financial decisions would need to be made by a court-appointed conservator. At a court’s direction, the conservator would handle your financial assets. It’s a quite expensive and time consuming process, especially compared to the relative simplicity of executing a power of attorney.

After I die, can my agent continue to operate under my financial power of attorney?

A common misperception is that your agent will be able to use this power after your death. At your death, any power of the agent is automatically revoked and it will be necessary to switch management to the representative appointed through probate.

Laptop with finance info on it

Who should I choose to serve as an agent?

The agent you choose will be managing your finances, so it is critically important to choose someone trustworthy; someone who will not abuse or exploit this power; someone who will listen to your wishes, goals, and objectives, as included in the document or otherwise communicated; and, someone who will look out for your best interests.

You also have the option of designating a successor agent who can take over if the original agent is unable or unwilling to serve. This is highly recommended.

Who should receive a copy of my financial power of attorney?

The person named as agent and any person named as a successor agent should receive a copy. It would also be wise to share a copy with your financial institution(s), such as your bank or credit union.

Can I revoke the financial power of attorney?

Yes, you may revoke the document, at any time. You can also amend the document (change it, revise it, etc.) at anytime.


Financial power of attorney is one of the six main documents which comprise Iowans’ estate plans. To get started on establishing your financial power of attorney contact me by phone at 515-371-6077 or email.

healthcare power of attorney

What is a healthcare POA?

A healthcare power of attorney (“POA”) is a legal instrument that allows you to select the person that you want to make healthcare decisions for you if and when you become unable to make them for yourself. The person you choose is your agent/representative for purposes of healthcare decision-making.

What types of healthcare decisions can be covered by a healthcare POA?

healthcare power of attorney hands

A healthcare POA can govern any kind of decision that is related to your health that you want to address. A healthcare POA may include decisions related to organ donation, hospitalization, treatment in a nursing home, home health care, psychiatric treatment, and more.

For example, if you don’t want to be kept alive with machines, you can make this clear in your POA for healthcare. But keep in mind your POA for healthcare isn’t just about end-of-life decisions – again, it can cover any medical situation.

When would I use a healthcare POA?

A healthcare POA is used when you become unable to make healthcare decisions for yourself. Your agent will then be able to make decisions for you based on the information you provided in your healthcare POA. Equally important, your agent will be access your medical records, communicate with your healthcare providers, and so on.

What happens if I don’t have a healthcare POA?

doctors in operating room

If don’t have a healthcare POA, and you should become disabled to the point where you are unable to make healthcare decisions for yourself, your doctor(s) will ask your family and friends what to do.

You might disagree with the decision your family makes, or your family members may not be able to agree on how to handle your medical care.

Ultimately, if your loved ones can’t agree on a course of action, they would have to go to an Iowa Court and have a conservator/guardian appointed for you. It may, or may not, be someone you would have chosen. Further, the conservator/guardian may make decisions you wouldn’t have made.

This is all very complicated, time consuming, and expensive, especially compared with the convenience of simply having a healthcare POA in place. A healthcare POA gives you control over how decisions are made for you, and the agent you choose will carry out your wishes.

Is there a “one-size-fits-all” POA for healthcare?

No! All Iowans are special and unique and have special and unique issues and concerns. Consequently, this article is presented for informational purposes only, not as legal advice. Consult your lawyer for personal advice.

Do I need other estate planning documents in addition to a healthcare POA?

Yes, definitely! There are six “must have” estate planning documents most Iowans need; healthcare POA is just one of those documents.


Do you have a healthcare POA? Do you have an overall estate plan? Why or why not? Want to get started on crafting your healthcare POA (and other essential estate planning documents) let’s talk. Email me anytime at gordon@gordonfischerlawfirm.com or give me a call at 515-371-6077.

Dandelion blowing in wind

If a charitable contribution is made to a foreign organization, the donor generally cannot deduct the contribution for income tax purposes. Exceptions may apply in very limited situations; specifically, the U.S. has tax treaties with Canada, Israel, and Mexico. Generally, though, if the donee is a foreign charitable organization an income tax deduction is unavailable. Interestingly enough, both the estate and gift tax charitable deductions are available for gifts to foreign charitable organizations.

So, assume Jill Donor wants to help Charity X, which is organized and operated in Paris, France. If Donor made the gift during lifetime then no income tax deduction would be allowed because gifts to foreign charities normally are not deductible for federal income tax purposes. Note, however, that the lifetime gift removes the asset from Jill’s estate, so the gift would have the same effect as a charitable bequest from Donor’s will.

Woman looking out from balcony in Paris

It is important to know where the charity is organized and operated. If the organization is operated organized in a foreign nation – such as our example charity organized and operated in Paris, France – donations to such organizations are not eligible for the federal income tax deduction. This is true regardless if donations to a similar organization in the U.S.–such as a similar organization organized and operated in Paris, Texas–would be eligible.

A donor in doubt about a deduction can seek information from the charity, of course. And, a donor can search for the charity using the IRS’ “Select Check” online search tool.

Of course, if concerned about deductibility, a potential donor should also seek advice from a professional advisor. I’m happy to help, so don’t hesitate to reach out via email (gordon@gordonfischerlawfirm.com) or by phone (515-371-6077) if you’re considering making a donation to a foreign-based charity.

Young couple holding hands

So, WHO needs an estate plan, anyway?

Who needs to be most concerned with estate planning? What age group? Ask Iowans this question, and I’ll bet most would conjure up the image of a retiree who just spent 50+ years working hard to acquire significant assets. Of course, it’s important for this demographic to have a quality estate plan, that’s fairly obvious.

But, imagine a young, married couple. They both have good jobs, live in a fine starter home, and have a baby.

crying newborn baby

This young couple tries to put away a little bit of money for savings, in a 529 college fund, and for retirement. Why should they worry about estate planning?

The truth is, this young couple should be just as concerned–arguably, even more concerned–with estate planning as the retiree.

Here are four reasons why:

  • Choosing guardians for minor children. In an estate plan, you can choose the guardians of minor children (e.g., children under age 18). If you should become incapacitated, or even die without any estate plan, an Iowa court would have no choice but to appoint a guardian for your children – but it may not be who you wanted or would have chosen. Better to have plenty of time to consider and make a careful, well-reasoned choice.

 

  • Save on fees, court costs, and taxes. A good estate plan can save you and your estate money on fees, court costs, and taxes—perhaps even achieve substantial savings. These savings can be even more critically important for a smaller estate (more likely when you’re younger), than for larger estate (more likely as you grow older). Often, young folks actually have the greatest need to save money to pass along the greatest amount they possibly can to family and loved ones.

 

  • Help favorite charities. Young people often are passionate about one or more causes. Having an estate plan means that you can put into place much needed help for your favorite charities.

 

  • Life is uncertain. It may be awkward to talk about, but life isn’t guaranteed for any of us, young or old. There’s an old saying in estate planning circles that goes, “People don’t always die when they are supposed to.” Wives usually outlive their husbands, parents usually outlive their children, and so on, but not always. It is best to be prepared for anything and everything.

Mom and daughter hugging

Who should be most concerned with estate planning? I actually think young people should be!

Do you agree? Why or why not? I’d be very interested in your thoughts. Email me at gordon@gordonfischerlawfirm.com.

Whatever your age, if you are interested in estate planning, a good place to start is my free Estate Planning Questionnaire. You can download it (for free) by simply clicking here.

gifts-to-charity-form

Save $$$ and help your favorite charities even more.

Some say it’s better to give than receive. I say, it’s better to give and receive. You can both give and receive by using the federal income tax charitable deduction.

A gift to a qualified charitable organization may entitle you to a charitable contribution deduction against your income tax if you itemize deductions. Assuming the gifts are deductible, the actual cost of your gift is reduced by your tax savings.

Charitable deduction tax savings

In short, as of March 2017, there are seven federal income tax brackets: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. (For a general discussion of tax brackets, see my post called bracketology.)

The charitable deduction can result in significant tax savings. For example, assume a donor in the 33% tax bracket gives to her favorite qualified charitable organization a donation of $100. The charity still receives the full gift of $100. But, for the donor, the actual out-of-pocket cost of the gift is only $67, and the donor saves $33.

Let’s make these assumptions for all tax brackets and see the savings which result:

Bracket          Donation                 Savings                           Actual cost
10%                     $100                               $10                                       $90
15%                     $100                               $15                                       $85
25%                     $100                               $25                                       $75
28%                     $100                               $28                                       $72
33%                     $100                               $33                                       $67
35%                     $100                               $35                                       $65
39.6%                  $100                               $39.60                                $60.40

This is a good deal for you and a good deal for your favorite causes. So why not consider using the charitable deduction?

The charitable deduction requires you to be organized in your giving and maintain records. Generally speaking, the greater the deduction, the more detailed the records you are required to keep.

The basics of substantiation of your charitable deduction

Here’s a simple explanation of IRS record keeping rules for the charitable deduction:

  • Gifts of less than $250 per donee — you need a cancelled check or receipt
  • $250 or more per donee — you need a timely written acknowledgement from the donee
  • Total deductions for all property exceeds $500 — you need to file IRS Form 8283
  • Deductions exceeding $5,000 per item — you need a qualified appraisal completed by a qualified appraiser

Wait, you ask, is it really that simple? Actually, no, not really. Let’s go through these categories and dig deeper.

Substantiation requirements for monetary gifts less than $250

Donate button on keyboard

A federal income tax deduction for a charitable contribution in the form of cash, check, or other monetary gift is not allowed unless the donor substantiates the deduction with a bank record or a written communication from the donee showing the name of the donee, the date of the contribution, and the amount of the contribution.

Meaning of “monetary gift”

For this purpose, the term “monetary gift” includes, of course, gifts of cash or by check. But monetary gift also includes gifts by use of:

  • credit card;
  • electronic fund transfer;
  • online payment service;
  • payroll deduction; or
  • transfer of a gift card redeemable for cash.

Meaning of “bank record”

Again, to claim the charitable deduction for any monetary gift, you need a bank record or written communication from the donee. The term “bank record” includes a statement from a financial institution, an electronic fund transfer receipt, a cancelled check, a scanned image of both sides of a cancelled check obtained from a bank website, or a credit card statement.

Meaning of “written communication”

The term “written communication” includes email. Presumably it also includes text messages. But, again, the written communication, whether paper or electronic, it must show the name of the donee, the date of the contribution, and the amount of the contribution.

Substantiation of gifts of $250 or more

Hands raising to give to charity

For any contribution of either cash or property of $250 or more, a donor must receive contemporaneous written acknowledgment from the donee. Two keys here: “contemporaneous” and “written acknowledgement”; both have very specific meanings in this context.

Requirements of written acknowledgment

The written acknowledgment must include:

  1. The date of the gift and the charity’s name and location.
  2. Whether the gift was cash or a description of the noncash gift.
  3. A statement that no goods or services were provided by the organization in return for the contribution, if that was the case.
  4. A description and good faith estimate of the value of goods or services, if any, that an organization provided in return for the contribution.
  5. A statement that goods or services, if any, that an organization provided in return for the contribution consisted entirely of intangible religious benefits, if that was the case.

“Contemporaneous”

For a written acknowledgment to be considered contemporaneous with the contribution, a donor must receive the acknowledgment by the earlier of: the date on which the donor actually files his or her individual federal income tax return for the year of the contribution or the due date (including extensions) of the return.

Noncash gifts of more than $500

If you make a total of more than $500 worth of noncash gifts in a calendar year, you must file Form 8283, Noncash Charitable Contributions, with your income tax return.

You’ll only have to fill out Section A of Form 8283 if:

  • the gifts are worth less than $5,000, or
  • you’re giving publicly traded securities (even if they’re worth more than $5,000).

Otherwise, you’ll be required to fill out Section B of Form 8283 and all that entails.

Noncash gifts of more than $5,000

Kids holding a "Give"" sign

If you donate property worth more than $5,000 ($10,000 for stock in a closely held business), you’ll need to get an appraisal. The information goes in Section B of Form 8283, “Noncash Charitable Contributions.”

An appraisal is required whether you donate one big item or several similar items which have a total value of more than $5,000. For example, if you give away a hundred valuable old books, and their total value is more than $5,000, you’ll need an appraisal even though you might think you’re really making a lot of small gifts. The rule applies even if you give the items to different charities.

Requirements for “qualified appraisal” and “qualified appraiser”

Again, noncash gifts of more than $5,000 in value, with limited exceptions, require a qualified appraisal completed by a qualified appraiser. The terms “qualified appraisal” and “qualified appraiser” are very specific and have detailed definitions according to the IRS.

“Qualified appraisal”

A qualified appraisal is a document which is:

  1. made, signed, and dated by a qualified appraiser in accordance with generally accepted appraisal standards;
  2. timely;
  3. does not involve prohibited appraisal fees; and
  4. includes certain and specific information.

Let’s further examine each of these four requirements.

“Qualified appraiser”

Appraiser education and experience requirements

An appraiser is treated as having met the minimum education and experience requirements if she is licensed or certified for the type of property being appraised in the state in which the property is located. In Iowa, for a gift of real estate, this means certification by the Iowa Professional Licensing Bureau, Real Estate Appraisers.

Further requirements for a qualified appraiser include that she:

  1. regularly performs appraisals for compensation;
  2. demonstrates verifiable education and experience in valuing the type of property subject to the appraisal;
  3. understands she may be subject to penalties for aiding and abetting the understatement of tax; and
  4. not have been prohibited from practicing before the IRS at any time during three years preceding the appraisal.

Also, a qualified appraiser must be sufficiently independent. This means a qualified appraiser cannot be any of the following:

  1. the donor;
  2. the donee;
  3. the person from whom the donor acquired the property [with limited exceptions];
  4. any person employed by, or related to, any of the above; and/or
  5. an appraiser who is otherwise qualified, but who has some incentive to overstate the value of the property.

Timing of appraisal

The appraisal must be made no earlier than 60 days prior to the gift and no later than the date the return is due (with extensions).

Prohibited appraisal fees

The appraiser’s fee for a qualified appraisal cannot be based on a percentage of the value of the property, nor can the fee be based on the amount allowed as a charitable deduction.

Specific information required in appraisal

Specific information must be included in an appraisal, including:

  1. a description of the property;
  2. the physical condition of any tangible property;
  3. the date (or expected date) of the gift;
  4. any restrictions relating to the charity’s use or disposition of the property;
  5. the name, address, and taxpayer identification number of the qualified appraiser;
  6. the appraiser’s qualifications, including background, experience, education, certification, and any membership in professional appraisal associations;
  7. a statement that the appraisal was prepared for income tax purposes;
  8. the date (or dates) on which the property was valued;
  9. the appraised FMV on the date (or expected date) of contribution;
  10. the method of valuation used to determine FMV;
  11. the specific basis for the valuation, such as any specific comparable sales transaction; and
  12. an admission if the appraiser is acting as a partner in a partnership, an employee of any person, or an independent contractor engaged by a person, other than the donor, with such a person’s name, address, and taxpayer identification number.

Appraiser’s dated signature and declaration

Again, a qualified appraisal must be signed and dated by the appraiser.  Also, there must be a written declaration from the appraiser that he/she is aware of the penalties for substantial or gross valuation.

Work with professional on taxes

The charitable deduction can result in significant tax savings. But, substantiation rules, as you’ve seen, can be complicated. Also, all Iowans are unique, so be sure to contact the appropriate tax professional for personal advice and counsel.

I provide trainings for nonprofits and their staffs, board members, and stakeholders. Reach out to me any time by emailing me at gordon@gordonfischerlawfirm.com or call 515-371-6077. I’d love to hear from you!