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Thursday, May 2, 2024
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Case Studies |
Wild Bill Russell Donates A Stuffed Elk
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Case:
Bill Russell grew up on the Great Plains. During his youth, he was a rodeo bull rider and gained fame as “Wild Bill” for his daring exploits. After a major injury, he married his sweetheart Glenda and moved to ranching country in Montana. But Wild Bill was also a dedicated hunter. Each year he hired expert guide Walt Wilson and both traveled the high country in search of a trophy elk. After several years of pursuing the elusive animals through the Rockies, Wild Bill finally succeeded. His elk that year was a magnificent trophy animal. He and Walt had to use mules to take it back to town. Since it was the finest elk Wild Bill had ever seen, he had Tom Taxidermist preserve and stuff the elk. Wild Bill then placed the stuffed elk next to his favorite chair in the living room. After a year with the very large stuffed elk in the family living room, Glenda exclaimed, “That stuffed elk takes up half of our living room! Either it goes or I do!” Ever willing to listen to his lovely wife Glenda, Wild Bill then donated the stuffed elk to the Western Wildlife Museum.
Question:
Wild Bill donated the elk because he wanted others to be able to view the preserved animal. However, there was substantial cost for both the hunting trip and for Tom Taxidermist’s fees for preserving the elk. Therefore, it occurred to Wild Bill that perhaps he could qualify for a charitable tax deduction. So Bill called his CPA Helen Swenson and asked about his elk donation. He thought, “Maybe I will receive a large tax deduction and save taxes. But what is deductible? I don’t want to get into any trouble with the IRS.”
Solution:
The stuffed elk is tangible personal property. If it has been held for a year and increased in value, gifts of tangible personal property to a charity may qualify for a fair market value deduction if there is a related use by the charity. The charity certifies its intent to use the tangible personal property for a purpose related to its exempt mission. In this case, the Western Wildlife Museum was willing to certify in writing that it would display the stuffed elk in a manner related to its exempt purpose.
However, there is a special rule for gifts of taxidermy. At one time hunters had been gifting stuffed animals acquired in hunting expeditions to various charities and deducting both the expedition costs and the taxidermy costs. As a result, the law was changed and the charitable deduction will be the lesser of Wild Bill’s basis in the stuffed elk or its fair market value. In addition, Wild Bill’s basis includes only the direct cost for Tom Taxidermist to preserve and stuff the elk. Indirect costs such as the hunting expedition costs are not deductible.
Bill was still happy to have made the gift and CPA Helen Swenson did take a deduction for the amount of Tom Taxidermist’s fee. Glenda was also delighted to have the stuffed elk out of her living room.
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