|As Seen In:|
Internal Revenue Service Tax Information
IRS Publication 526: Charitable Contributions
This excerpted information is provided to you only as a courtesy. The complete text of this federal publication is available online at http://www.irs.ustreas.gov/
The Pacific Marine Foundation strongly suggests that you seek qualified legal and financial advice, especially regarding the donation of all property you believe to be of greater than $5,000.00 value. We have included our notes regarding changes made to the tax law as of January 1, 2005, which govern the amount of the allowable deduction from your property donation.
We encourage you to review the following information with your tax advisor to determine whether it is applicable to your individual situation.
This publication discusses organizations that are qualified
to receive deductible charitable contributions, the types of contributions
you can deduct, how much you can deduct, what records to keep, and how
to report charitable contributions. A charitable contribution is a donation
or gift to, or for the use of, a qualified organization. It is voluntary
and is made without getting, or expecting to get, anything of equal value.
Qualified organizations include nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals. You will find descriptions of these organizations below.
Organizations That Qualify To Receive Deductible Contributions
You can ask any organization whether it is a qualified organization, and most will be able to tell you. Or, you can check IRS Publication 78 which lists most qualified organizations.
Types of Qualified Organizations
Generally, only the five following types of organizations can be qualified organizations:
A community chest, corporation, trust, fund, or foundation organized or created in or under the laws of the United States, any state, the District of Columbia, or any possession of the United States (including Puerto Rico). It must be organized and operated only for:
You Can Deduct
Generally, you can deduct your contributions of money or property that you make to, or for the use of, a qualified organization. A gift or contribution is "for the use of" a qualified organization when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement. The contributions must be made to a qualified organization and not set aside for use by a specific person.
If you give property to a qualified organization, you generally can deduct the fair market value of the property at the time of the contribution. * (See note below)
Your deduction for charitable contributions is generally limited to 50% of your adjusted gross income.
(NOTE: Current rules restrict
the deduction to the donor to the actual gross proceeds received by the
qualified organization upon sale of the donated item. If, however, the
donated item is held and used by the qualified organization for at least
three years, the allowable deduction is the fair market value of the property
at the time of the contribution.)
Determining Fair Market Value
This section discusses general guidelines for determining
the fair market value of various types of donated property. Fair market
value is the price at which property would change hands between a willing
buyer and a willing seller, neither having to buy or sell, and both having
reasonable knowledge of all the relevant facts.
Cars, boats, and aircraft
If you contribute a car, boat, or aircraft to a charitable
organization, you must determine its fair market value. Certain commercial
firms and trade organizations publish guides, commonly called "blue books,"
containing complete dealer sale prices or dealer average prices for recent
model years. The guides may be published monthly or seasonally, and for
different regions of the country. These guides also provide estimates
for adjusting for unusual equipment, unusual mileage, and physical condition.
The prices are not "official" and these publications are not considered
an appraisal of any specific donated property. But they do provide clues
for making an appraisal and suggest relative prices for comparison with
current sales and offerings in your area. These publications are sometimes
available from public libraries or from the loan officer at a bank, credit
union, or finance company. Except for inexpensive small boats, the valuation
of boats should be based on an appraisal by a marine surveyor because
the physical condition is critical to the value.
A bargain sale of property to a qualified organization (a sale or exchange for less than the property's fair market value) is partly a charitable contribution and partly a sale or exchange.
Part that is a sale or exchange
The part of the bargain sale that is a sale or exchange may result in a taxable gain. For more information on determining the amount of an taxable gain, see Bargain Sales as Gifts in chapter 1 of Publication 544.
Part that is a charitable contribution
Figure the amount of your charitable contribution in three steps.
When To Deduct
You can deduct your contributions only in the year you actually make them in cash or other property (or in a succeeding carryover year, as explained below).
The 50% limit applies to the total of all charitable contributions you make during the year. This means that your deduction for charitable contributions cannot be more than 50% of your adjusted gross income for the year.
Only limit for 50% organizations
The 50% limit is the only limit that applies to gifts to
organizations listed below under 50% Limit Organizations.
50% Limit Organizations
You can ask any organization whether it is a 50% limit organization, and most will be able to tell you. Or you may check IRS Publication 78 (described earlier). Only the following types of organizations are 50% limit organizations.
You can carry over your contributions that you are not able
to deduct in the current year because they exceed your adjusted gross
income limits. You can deduct the excess in each of the next 5 years until
it is used up, but not beyond that time. Your total contributions deduction
for the year to which you carry your contributions cannot exceed 50% of
your adjusted gross income for that year.
For a contribution not made in cash, the records you must keep depend on whether your deduction for the contribution is:
Deductions Over $500: But Not Over $5,000
If you claim a deduction over $500 but not over $5,000 for a noncash charitable contribution, you must have the acknowledgement and written records described [below].
Your records must also include:
Deductions Over $5,000
If you claim a deduction of over $5,000 for a charitable contribution of one property item or a group of similar property items, you must have the acknowledgement and the written records described under Deductions Over $500 But Not Over $5,000. In figuring whether your deduction is over $5,000, combine your claimed deductions for all similar items donated to any charitable organization during the year. Generally, you must also obtain a qualified written appraisal of the donated property from a qualified appraiser.
[This information was excerpted and edited from IRS Publication 526, rev. 11/96; Charitable Contributions.]
Pacific Marine Foundation, Inc. • 1900 W. Nickerson, Suite 116-218, Seattle, WA 98119-1661 • Phone: (206) 225-3360 • Fax: (206) 260-7519