Cash
Income Tax Deduction
The donor may deduct the amount of cash transferred in the year of the gift, up to 50% of his or her adjusted gross income (AGI), for gifts to public (50%) charities; the limitation is 30% of AGI for gifts to private foundations (30% charities). A five-year carryover is allowed for deductions that exceed these ceilings.
Capital Gains Considerations
None
Date Gift Is Effective
The gift is effective on the date of the unconditional delivery of cash, check, or electronic transfer of funds to a charity or its agent. Gifts by check are considered made when they are mailed (postmark date governs); credit card gifts are completed on the date the charge is made. Pledges and promissory notes are deductible when paid.
Method of Transfer
Checks or other cash equivalent, including credit card charges, electronic transfers, and physical delivery of cash.
Valuation of Gift Assets
Amount of cash
Substantiation Requirements
For gifts under $250, a canceled check or other bank record is required. For gifts of $250 or more, a written receipt from the charity describing the gift and stating whether goods and services were received by the donor (quid pro quo statement), issued prior to the filing of the donor's tax return, is needed.
Special Considerations
Cash gifts are deducted first when donor gives both cash and noncash assets during the year; carried over deductions from cash gifts are considered before carryovers of property gifts. Gifts also may save gift and estate taxes.
Marketable Securities
• Common & Preferred Stock • Corporate Bonds
• Government Securities • Mutual Funds
Income Tax Deduction
The current value of appreciated securities held long-term (more than one year) is deductible, if transferred to a 50% charity, up to 30% of AGI with a five-year carryover for excess deductions. The ceiling is 20% of AGI for 30% charities, with a five-year carryover. Securities with short-term gain are deductible at cost basis up to 50% of AGI (30% for private foundations).
Capital Gains Considerations
No gain is reportable when donors give appreciated securities, which is advantageous even for taxpayers who do not "itemize" deductions.
Date Gift Is Effective
The gift is effective on the date of delivery of certificates in negotiable form to a charity or its agent (postmark date if certificates are mailed). If securities are held in "street name," the gift is effective on the date the transfer is noted on the charity's account. If a new certificate is issued in the name of the charity, the date is when the security is transferred on the books of the transfer agent.
Method of Transfer
Donors who hold the certificates must endorse the securities or sign a stock power and deliver to a charity or its agent. Where securities are held in street name, the transfer can be made to a charity's account or be delivered to a charity's agent in negotiable form.
Valuation of Gift Assets
The value is the mean between the high and low or the bid and ask price on the date of the gift, based on published figures or quotes from securities dealers. Gifts of mutual funds are measured by "net asset value" or the bid on the date of delivery of certificates in negotiable form or the date of transfer on the books of the transfer agent.
Substantiation Requirements
Securities worth $250 to $500 require a receipt from the charity, with quid pro quo statement. A gift of securities worth more than $500 requires a receipt from the charity and completion of Section A of Form 8283.
Special Considerations
Donors of appreciated securities can qualify for the 50%-of-AGI ceiling by electing to reduce their contribution deductions by 100% of the gain present in the property. This strategy may be attractive where long-term capital gain is insubstantial.
Real Estate
Income Tax Deduction
The current value of appreciated real estate held long-term is deductible, less any indebtedness, if transferred to a 50% charity, up to 30% of AGI, with a five-year carryover for excess deductions. Transfers to 30% charities are deductible at cost basis only, up to 20% of AGI, with a five-year carryover. Realty with short-term gain is deductible at cost basis.
Capital Gains Considerations
No gain is reportable. The deduction is not reduced for prior depreciation deductions, unless the donor took an accelerated depreciation that would have resulted in the recapture of ordinary income upon a sale. Gain must be reported from any bargain sale, including gifts of mortgaged realty.
Date Gift Is Effective
The gift is made on the date an executed deed is delivered to a charity or its agent. If the deed is mailed, the postmark determines the date of the gift. In some states, the date of the gift may be when the deed is recorded.
Method of Transfer
Transfer of title of contributed realty is generally made by a quit-claim deed, unless a warranty deed is deemed necessary by either of the parties.
Valuation of Gift Assets
The value is established by an independent appraisal. Comparable selling prices for similar properties may be the best evidence of value. Indebtedness reduces value.
Substantiation Requirements
A receipt from the charity and a quid pro quo statement are required. For deductions exceeding $5,000, donors also need qualified appraisals and completed Sections A and B of Form 8283, including a declaration by the appraiser and a donee acknowledgment.
Special Considerations
Charities generally require Level 1 environmental assessments. The title should be checked for liens and defects. The charity may incur taxable income if mortgaged realty was owned by the donor less than five years and the mortgage is less than five years old.
Closely Held Securities
Income Tax Deduction
A donor may deduct the current value of appreciated closely held securities held long-term, if transferred to a 50% charity, up to 30% of AGI with five-year carryover for excess deductions. Transfers to 30% charities are deductible at cost basis only, up to 20% of AGI, with a five-year carryover. Securities with short-term gain are deductible at cost basis.
Capital Gains Considerations
No gain is reportable when donors give closely held securities, which is advantageous even for taxpayers who are unable to "itemize" deductions.
Date Gift Is Effective
The date of the gift is the date of delivery of securities in negotiable form to a charity or its agent. If certificates are transferred into a charity's name, the gift is made on the date the securities are transferred on the books of the transfer agent; normally it is the date of the certificate.
Method of Transfer
Delivery of securities must be made in negotiable form to a charity or its agent, or by transfer of certificates into the charity's name.
Valuation of Gift Assets
The value is established by an independent appraisal, applying IRS rules. Factors considered in valuing closely held stock include corporate assets, earnings and future earning power, dividend policy, prospects of the company, and sales of stock near the contribution date.
Substantiation Requirements
For deductions of $5,000 or less, a receipt from the charity and Section A of Form 8283 are required. From $5,001 to $10,000 of deduction, Section A and Parts I and II of Section B of Form 8283 are also required. Above $10,000, receipts, qualified appraisals, and completed Sections A and B of Form 8283 are needed.
Special Considerations
Gifts of closely held securities are often negotiated with anticipation of corporate redemption of charity's stock. A new certificate of stock should be obtained. Gifts may also be attractive where the sale of a corporation is anticipated.
Life Insurance
Income Tax Deduction
A donor may deduct the fair market value of the policy or the donor's cost basis, whichever is less, when the donor transfers all rights of ownership in the policy, subject to a 50% of AGI ceiling (30% for private foundations). Policy loans reduce deductions. No deductions are allowed where the charity is merely named the death beneficiary.
Capital Gains Considerations
Life insurance is ordinary income property. Generally a gift does not cause recognition of gain unless the policy is subject to a loan.
Date Gift Is Effective
Generally, the gift is complete on the date the policy is delivered to a charity, accompanied by an endorsement from the company.
Method of Transfer
Ownership of the policy is transferred to the charity through an endorsement by the donor on forms supplied by the insurance company and accompanied by the delivery of the insurance policy.
Valuation of Gift Assets
The value of a paid-up policy is its replacement cost; the value of a non-paid-up policy is the interpolated terminal reserve plus any unearned premium and accrued dividends, less any policy loans as of the date of the gift.
Substantiation Requirements
For gifts under $250, a canceled check or other bank record is needed. For gifts of $250 or more, a written receipt from the charity is required. Gifts over $500 require Section A of Form 8283, and some commentators suggest qualified appraisals are necessary where the deduction claimed for a policy exceeds $5,000 (Section B of Form 8283).
Special Considerations
Rather than contribute a policy or make charity the death beneficiary, donors may employ life insurance in a wealth replacement plan, often including an irrevocable life insurance trust, to replace in their estates assets contributed to a charitable remainder trust or other gift arrangement.
Tangible Personal Property (Collectibles)
Income Tax Deduction
A donor may deduct the fair market value of long-term capital gain property if the property is transferred to a public charity that can put the item to a use related to its purposes; 30% of AGI ceiling applies. Unrelated use will limit the deduction to cost basis, but a 50% ceiling applies. The same reduction applies if item is artwork transferred by the artist who created it. Gifts to 30% charities limited to cost basis.
Capital Gains Considerations
No gain is reportable when donors give "collectibles" or other tangible personal property, which is advantageous even for taxpayers who cannot "itemize" deductions.
Date Gift Is Effective
The date of the gift is the date of delivery of property to a charity or its agent, including the gift of a fractional interest. For subsequent gifts of fractional interests in the same asset, deductions will be based on the asset's value on the date of the original contribution.
Method of Transfer
A transfer is generally made by the delivery of the property. A deed of the gift or bill of sale is advisable.
Valuation of Gift Assets
An appraisal is generally required. Donors must send photos of the artworks to the IRS advisory panels that value contributions of art over $20,000. Donors can request a "Statement of Value" from the IRS for artwork valued at more than $50,000.
Substantiation Requirements
For a single item worth $250 to $500, a receipt from the charity is needed. For a single item worth $501 to $5,000, Section A, Form 8283 is also required. For a single item over $5,000 (or multiple "similar items" exceeding $5,000), Section B, Form 8283, is required as well, with a qualified appraisal.
Special Considerations
The sale of tangible personal property by a charity is by itself an unrelated use, even where the sale proceeds are used for the charity's programs. Gifts of future interests in tangible personal property are not deductible until any intervening interest ends.
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