ISSUE #8
IRS Reminds Taxpayers about Charitable Gift
Substantiation for 2004

In FS-2005-1 ( 3 Jan 2005 ), the IRS noted many of the 2004 tax law changes. In addition, the Service reminded taxpayers that there are specific requirements for substantiating charitable gifts.

Cash gifts over $250 require a receipt from the charity prior to filing a tax return. The receipt normally indicates that the charity provided no goods or services to the donor. If the donor contributed more than $75 and the charity provided a benefit to the donor, such as a dinner, the estimated fair market value of the benefit provided must be stated by the charity.

Property gifts under $500 in value are generally deductible at fair market value. The receipt from the charity should list the date of the gift, the city and state, a brief description of the property and state that no goods or services were provided by the charity for the donor.

Noncash gifts over $500 in value require the filing of IRS Form 8283. Part A of Form 8283 is used to enter the date and method of acquiring the property, the cost basis of the property and general description.

Property valued at more than $5,000 ($10,000 for stock in a family or closely-held business) will require an appraisal. The appraisal may be from 60 days prior to the date of the gift until the date the tax return is due (including extensions). For gifts over $5,000, the appraiser and the charity must sign IRS Form 8283. The appraiser must “hold himself or herself out to the public” as an appraiser and may not be the donor, an employee of the donor, the charity or anyone who would not be able to be objective.

For art work valued at over $20,000 or for property gifts valued at over $500,000, the actual appraisal must be appended to the tax return.

If the property is valued at over $5,000 and the charity signs Form 8283, then the charity agrees to file Form 8282 if there is a sale or other transfer of the property within two years of the gift. Form 8282 will report the value of the sale proceeds to the IRS and may be used by the Service to compare the charitable deduction with the value received by the charity.

What Do I Do With All My Life Insurance – a New Wrinkle – Selling It!

There comes a time when each person should evaluate their life insurance portfolio and make a decision as to keeping, increasing or canceling all or part of it, depending upon current or anticipated circumstances. Letting coverage lapse, cashing a policy in and capturing the cash value (if it exists) or assigning it to charitable interests have been the only options in the past. Today, things have changed. There may be a market for your old policy and you may be able to sell it. Or, you may perhaps be able to trade it (or the assets it holds) for a cheaper policy or long term health care insurance.

Generally, the term applied to such a transaction is called “life settlement.” Another term one might encounter is “viatical settlements” (although less used recently). A life settlement option can allow persons to sell their policies to a third party at some level below the death benefit and usually a multiplier above cash value (if there is any). This strategy has evolved from when it was used exclusively for terminally ill patients and gained some exposure during the initial Aids awareness in the ‘80’s.

Who is eligible? For the most part, it is assumed that one should be above the age of 65 and have an age expectancy of 12 years or less. You may learn more about this option from your investment or insurance advisor. Or, or you may do a web search for viatical or policy settlements. Should you wish, Ashland University will also provide direct web sites for your research.

This publication has been prepared as an educational resource to help the reader identify areas of potential concern. The publisher is not engaged in rendering legal, accounting or other professional services. The information contained in this publication should not be acted upon without first obtaining the advice of a professional adviser. 2004 © Florida Philanthropic Advisors, LLC. Material may not be used without permission.

Our planned giving director, Paul Ditlevson, can be of tremendous service in helping you integrate your giving goals with your overall estate plan. He can also help you prepare to visit your attorney. You can reach Mr. Ditlevson by calling 419-289-5090 or by email to pditlevs@ashland.edu or regular mail at 401 College Avenue, Ashland, OH 44805.