Thursday April 18, 2024
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4.3.2 Tangible Personal Property Gift Methods
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Tangible Personal Property Gift Methods
Gift Methods and Gift Date: State law governs transfer of ownership of art, crops, vehicles, collections or other tangible personal property.
Gift of Crops: Crops may be transferred outright to a charity or to a charitable remainder trust.
Gift of Vehicles: Vehicles include cars, trucks, recreational vehicles, boats and airplanes.
Gift of a Collection: Gifts of stamps, coins, crystal, antiques or other collections will normally involve a deed of gift or letter of gift and physical transfer of the tangible personal property.
Clothing and Household Goods: A donor may donate clothing or household goods if at the time of contribution, the item is in good used condition or better and the donor follows the appropriate substantiation requirements for the value of the gift.
Charitable Gifts of Taxidermy: Hunters and fishermen may obtain and stuff or mount various animals, which are defined as taxidermy property.
Form - Deed of Gift of Tangible Personal Property: A deed of gift form is similar to a warranty deed for real estate.
Letter of Gift of Tangible Personal Property: A second and less formal option is a letter of gift.
Pledge of Gift of Tangible Personal Property: Some donors may not be prepared to transfer property outright, but will be willing to pledge to make a future gift of the property.
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Gift Methods and Gift Date
State law governs the transfer of ownership in art, crops, vehicles, collections or other tangible personal property. Thus, state law determines whether a specific title or registration document is required for the assets. If there is a state document of title, it is preferable to transfer the asset using that document. For assets that do not have state title documents, such as crops or collections, a deed of gift or letter indicating the description of the asset, the date and the intent to make an irrevocable transfer to charity would be appropriate.
The effective date of the transfer is the date under state law when there is a legal and permanent transfer. If the gift is transferred in late December and there is a document of title under state law, it is also preferable to have the transfer recorded by the appropriate state agency before December 31. Nevertheless, so long as the transfer meets state law requirements, it should be recognized for federal tax purposes if it is completed by December 31.
Charitable gifts of tangible personal property (TPP) must meet the substantiation rules for noncash assets at each value threshold ($250, $500, $5,000 and $500,000). In addition, the condition of the property must be described. Reg 1.170A-16(c)(3)(iv)(B). Form 8283 must indicate whether the tangible personal property will be used for a purpose related to the charity's exempt purpose. Reg 1.170A-16(c)(3)(G).
Gift of Crops
Crops may be transferred outright to a charity or to a charitable remainder trust. Normally, the crop is harvested or severed prior to the transfer. For example, it is preferable to harvest the wheat, cut the hay or cut timber prior to a transfer to charity or into a trust. This avoids any potential partial interest problems, since the entire harvested crop is transferred to the trust.
Crops or cattle may be transferred through a deed of gift of personal property. It is also helpful to have a receipt by the custodian and a bill of sale from the transfer agent. Normally, crops and cattle are immediately transferred to the marketplace and sold. To show evidence that the crops or cattle have been transferred, the bill of sale must show that the crops or cattle were sold by the charity or the charitable remainder trust.
Gift of Vehicles
Vehicles include cars, trucks, recreational vehicles, boats and airplanes. Each item has a state document of title. Normally, the donor endorses the document of title. It is also desirable to have a second letter or deed of gift to document the intent of the donor to make an irrevocable transfer to charity or to a charitable trust. Gifts of "qualified vehicles" include motor vehicles intended to be used on public roads, boats or airplanes. Sec. 170(f)(12)(E). If valued at over $500, the gift of a qualified vehicle must be substantiated by a contemporaneous written acknowledgement from the charity. Sec. 170(f)(12)(A)(i).
The document of transfer should indicate the year, make, model and mileage for a car, truck or RV, the condition of the body, and general mechanical condition. It also is desirable to have a photo of the vehicle that shows the condition.
Certain procedures must now be followed in order to receive a deduction for the value of a used vehicle. The donor must receive a written acknowledgment of the contribution from the donee organization. The acknowledgment must include the name and taxpayer identification number of the donor and the vehicle identification number. Should the donee organization sell the vehicle without any intervening use or improvement of the vehicle, a certification stating that the vehicle was sold in an arm's length transaction between unrelated parties, the gross proceeds from the sale, and a statement that the deductible amount may not exceed the amount of such gross proceeds is also required to be furnished by the donee to the donor in order to receive the deduction for the vehicle donation. Form 1098-C may be filled out with this information and sent to the donor. Form 1098-C (or another qualifying statement) must be received by the donor within 30 days of the sale of the vehicle. However, different requirements exist if the donee organization makes an intervening use or serious improvements to the vehicle prior to the sale or the donee organization sells or gives the vehicle to a needy individual. If the donee organization makes an intervening use or serious improvement to the vehicle, Sec. 170(f)(12)(B) requires a certification of the intended use or improvement of the vehicle and the intended duration of the use, and a certification that the vehicle would not be transferred in exchange for money, other property, or services before completion of its use or improvement. If the vehicle is sold for $500 or less, the donor may deduct the lesser of the vehicle's fair market value or $500. If the donee organization sells or gives the vehicle to a needy individual, the donor may deduct up to the vehicle's fair market value. The donor of a qualified vehicle must attach a copy of the contemporaneous written acknowledgment to Form 8283.
Gift of a Collection
Gifts of stamps, coins, crystal, antiques or other collections will normally involve a deed of gift or letter of gift and physical transfer of the tangible personal property. With a collection, the letter or deed of gift should identify the type of collection and the number of items and include a general description of the property condition. The description should be sufficiently detailed to permit a reasonable understanding of the method for valuation. Reg. 1.170A-13(b)(2)(ii).
Normally, the donor will make the transfer and the charity or trustee of the trust will take immediate possession. It is helpful to promptly send the donor a thank you letter. In addition to the letter of donation or deed of gift, the thank you letter helps establish the date of the physical transfer of the collection.
Clothing and Household Goods
A donor may donate clothing or household goods if at the time of contribution, the item is in good used condition or better and the donor follows the appropriate substantiation requirements for the value of the gift. Reg. 1.170A-18(a)(1), (2). If the value of the contribution is over $500, the items are not required to be in good used condition or better if the donor obtains a qualified appraisal from a qualified appraiser under Reg. 1.170A-17(b)(1), the appraisal conforms to Reg. 1.170A-17(a)(1) and is submitted with the tax return for the year of the contribution and the donor completes Form 8283 (Section B) as described in Reg. 1.170A-16(d)(3). Reg. 1.170A-18(b).
Charitable Gifts of Taxidermy
Hunters and fishermen may obtain and stuff or mount various animals, which are defined as taxidermy property. Gifts of taxidermy property by the taxidermist or the person who paid the taxidermist are deductible at the lesser of cost basis or fair market value, even if the charitable donee will use the gift in a manner related to its exempt purpose. Sec. 170(e)(1)(B)(iv).
For a gift of taxidermy property to charity, the taxpayer's basis will include only the direct cost for preparing and mounting the item. Indirect costs such as the hunting expedition costs (including the cost of equipment and the costs of preparing an animal carcass for taxidermy) are not deductible. Taxidermy property is defined as any work of art that is the reproduction or preservation of an animal that is prepared, stuffed or mounted. Sec. 170(f)(15)(A).
Form - Deed of Gift of Tangible Personal Property
A deed of gift form is similar to a warranty deed for real estate. However, since the deed of gift of personal property is not recorded, there is usually no notary signature block.
Form 4.3.2A Deed of Gift of Tangible Personal Property
Date
With no consideration, ______________, an individual, hereby irrevocably gives and transfers to the qualified exempt charity ____________________________, of the City of ____________________, and State of __________________, all of his or her rights, title and interests, including the right to physical possession, in and to the following described tangible personal property:
On this ___________day of ____________ in the year _______ and in the County of ____________, State of _______________, I hereby sign this Deed of Gift of Tangible Personal Property.
______________________
Grantor/Donor
Letter of Gift of Tangible Personal Property
A second and less formal option is a letter of gift. This letter of gift must be dated and signed by the donor. It should identify the property and indicate that physical transfer of the assets to the representative has occurred at the time the letter of gift is signed.
Form 4.3.2B - Donor Letter of Gift
Date
To: Favorite Charity
123 Oak Street
Hometown, USA 55555
Dear Gift Planner,
I, Mary Donor, am currently the owner of tangible personal property with the following description and location:
I hereby declare that as of the date listed below, I irrevocably transfer all my rights, interests and title to this property to the qualified exempt charity ____________________________, of the City of ____________________, and State of __________________. On that date, I also irrevocably transfer to the charity physical possession of the described property. I acknowledge that this transfer is an irrevocable gift of this property to charity and that no rights with respect to this property have been retained by me or any other person.
____________________ _______________
Donor Date
Pledge of Gift of Tangible Personal Property
Some donors may not be prepared to transfer property outright, but are willing to pledge to make a future gift of the property. A pledge to make a future gift of tangible personal property is not currently deductible. It may be deducted only after any "intervening interest" has terminated. Reg. 1.170A-5(a)(1). In addition, the donor may bind his or her estate with a legal requirement to fulfill the pledge.
Form 4.3.2C - Pledge of Gift of Tangible Personal Property
Date
To: Favorite Charity
123 Oak Street
Hometown, USA 55555
I, Mary Donor, am currently the owner of tangible personal property with the following description and location:
I hereby declare that as of a future date described below, I pledge to irrevocably transfer all my rights and title to this property to the qualified exempt charity ____________________________, of the City of ____________________, and State of __________________. On that future date, I also irrevocably will transfer to the charity physical possession of the described property, and that no rights with respect to this property will be retained by me or any other person.
The date or time of transfer shall be as follows:
This pledge shall be a legal obligation of mine and my estate. It may be relied upon by the above charitable organization, and shall be legally binding in all circumstances. If the transfer of the above property shall not have occurred during my lifetime, then such transfer shall be a legally binding obligation upon my estate. If the specific property listed is not in my estate, then estate property of comparable value shall be transferred to the above charity.
____________________ _______________
Donor Date
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Case Studies on Tangible Personal Property Gift Methods
Wild Bill Russell Donates to the Cowboy Museum:
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. But Wild Bill was an artist at heart and soon decided to move on to his artistic pursuits. He traveled throughout America and Europe and studied all of the great modern and classical artists.
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