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Well-Informed Giving and Getting: Charitable Giving Rules

Well-Informed Giving and Getting: Charitable Giving Rules. Non-Profit Learning Point Seminar March 18, 2014. J. William Gray Hunton & Williams LLP Richmond, VA. Charitable Giving. Income tax charitable deduction depends on:. • Type of charity • Type of property given • Gift vehicle used

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Well-Informed Giving and Getting: Charitable Giving Rules

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  1. Well-Informed Giving and Getting: Charitable Giving Rules • Non-Profit Learning Point Seminar • March 18, 2014 J. William Gray Hunton & Williams LLP Richmond, VA

  2. Charitable Giving Income tax charitable deduction depends on: • • Type of charity • • Type of property given • • Gift vehicle used • • Benefits donor received

  3. Charitable Giving Income tax charitable deduction depends on: • • Type of donor • • Donor’s income • • Donor’s other gifts • • Proper documentation

  4. Charitable Giving Annual limits (all gifts by individuals to PCs, POFs, PCFs and DDFs) • • Overall: 50% of contribution base (like AGI) • • Cash: 50% • • Capital gain property: 30% (or rest of 50%) • • Excess carried forward for up to 5 years

  5. Charitable Giving Amount deductible (individuals) • • Usually cost plus LTCG component • • Not STCG or OI component • • Special rules for: • o Tangibles if not used in exempt activities • o Vehicles (usually restricted to sale price) • o Intellectual property

  6. Charitable Giving Amount deductible (cont.) • • Special rules for: • o Interest-free or below-market loans • o Gifts of partial interests • o Gifts of personal services • o Gifts with conditions or restrictions • o Taxidermy (!?!)

  7. Charitable Giving Amount deductible (entities) • • Corporations: 10% of income • o Special rules for inventory, depreciable assets, etc. • o 5-year carry-forward of excess • • Partnerships and LLCs: passed through to members • • S Corporations: passed through to shareholders • • Estates and trusts: all amounts paid or required to be distributed

  8. Charitable Giving Timing of Deduction • • General rule: deductible when delivered • • Checks when mailed • • Charges when made • • Conditional gifts when condition satisfied • • Stock when delivered or when re-registered • • Donor’s note when paid • • Option when exercised

  9. Charitable Giving General Substantiation Rules • • Gifts under $250: contemporaneous writing • • Gifts of $250 or more: qualifying receipt • oAmount or property description • o Goods or services statement • o Contemporaneous • • Gifts of $500 or more: cost and value info • • Gifts of $5,000 or more: qualified appraisal

  10. Charitable Giving Quid Pro Quo Rules • • Gifts over $75 with substantial return benefits • o Usual receipt information • o Good faith estimate of value furnished • o Reminder: only net is deductible • o Furnished at solicitation or receipt

  11. Charitable Giving Quid Pro Quo Rules • • Certain benefits disregarded • o Intangible religious benefits • o Low-cost ($10.20) items for $51 gift • o De minimis (2% or $102) benefits • o Frequently exercised benefits (discounts, parking) for payment of $75 or less

  12. Charitable Giving Quid Pro Quo Rules • • Estimate value based on comparables • • Not based on charity’s cost or profit • • Use commercial counterparts, if available • • Otherwise aggregate value of components • • Ignore certain features (art, celebrity presence, etc.)

  13. Charitable Giving Qualified Appraiser Definition • • Anyone who has the training and experience to appraise the gift property in question EXCEPT: • Donor • Party to the acquisition • Donee • Their employee • Their close relatives • Appraiser they regularly use

  14. Charitable Giving Qualified Appraisal Requirements • • Timing: 60 days pre-gift to return due date • Prepared, signed and dated by qualified appraiser • Contains all required information • Fee not based on appraised value or IRS acceptance • Need not accompany the return (but an appraisal summary must)

  15. Charitable Giving Some Ways to Lose a Deduction • • D.I.Y. appraisal: Mohamed • Appraise wrong asset: Evenchik and Alli • Omit valuation method: Friedberg • Fail to prove gift intent: Pollard • Derive substantial benefit: Patel • Mention unspecified benefit: Schrimsher • Obtain documentation late: Durden • Fail to write yourself a receipt: Villareale

  16. Charitable Giving Helpful IRS Resources • • Publ. 526 – Charitable Contributions • Publ. 561 – Determining the Value of Donated Property • Publ. 1771 – Charitable Contributions: Substantiation and Disclosure Requirements • Publ. 4302 – Charity Guide to Vehicle Donations • Publ. 4303 – Donor’s Guide to Vehicle Donations

  17. Charitable Giving Sponsorships and Commercial Co-ventures • • Sponsorships: gift v. ad sale • Avoid qualitative comparisons • Avoid endorsements or inducements to purchase • Surprisingly liberal regulations • No gift by buyers in commercial co-venture • Charity and venturer must register in VA

  18. Well-Informed Giving and Getting: Charitable Giving Rules • Non-Profit Learning Point Seminar • March 18, 2014 J. William Gray Hunton & Williams LLP Richmond, VA

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