Page 150 - Virtual Currencies

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
publications; call 800-829-3676 to order Date of contribution. Ordinarily, the date of a less weight if the property was not bought or
prior-year forms and instructions. The IRS will contribution is the date on which the property is sold at a time that is reasonably close to the
process your order for forms and publications delivered to the charity, provided you do not re- date of contribution.
as soon as possible. Don’t resubmit requests tain any right to or interest in the property that
you’ve already sent us. You can get forms and would limit the charity's use of the property. The cost or selling price is a good indication
publications faster online. of the property's value if:
Stock. If you deliver, without any condi- • The purchase or sale took place close to
Useful Items tions, a properly endorsed stock certificate to a the valuation date in an open market,
qualified organization or to an agent of the or-
You may want to see: ganization, the date of the contribution is the • The purchase or sale was at
“arm's-length,”
date of delivery. If the certificate is mailed and • The buyer and seller knew all relevant
Publication received through the regular mail, it is the date facts,
526 526 Charitable Contributions of mailing. If you deliver the certificate to a bank • The buyer and seller did not have to act,
or broker acting as your agent or to the issuing and
Forms (and Instructions) corporation or its agent, for transfer into the • The market did not change between the
8282 8282 Donee Information Return name of the organization, the date of the contri- date of purchase or sale and the valuation
bution is the date the stock is transferred on the
date.
8283 8283 Noncash Charitable Contributions books of the corporation.
8283-V 8283-V Payment Voucher for Filing Fee Options. If you grant an option to a quali- Example. Bailey Morgan, who is not a
Under Section 170(f)(13) fied organization to buy real property, you have dealer in gems, bought an assortment of gems
See How To Get Tax Help near the end of this not made a charitable contribution until the or- for $5,000 from a promoter. The promoter
claimed that the price was “wholesale” even
publication for information about getting these ganization exercises the option. The amount of though this dealer and other dealers made simi-
publications and forms. the contribution is the FMV of the property on lar sales at similar prices to other persons who
the date the option is exercised minus the exer-
cise price. were not dealers. The promoter said that if Bai-
What Is Fair Market ley kept the gems for more than 1 year and then
gave them to charity, Bailey could claim a chari-
Example. You grant an option to a local
Value (FMV)? university, which is a qualified organization, to table deduction of $15,000, which, according to
buy real property. Under the option, the univer- the promoter, would be the value of the gems at
To figure how much you may deduct for prop- sity could buy the property at any time during a the time of contribution. Bailey gave the gems
to a qualified charity 13 months after buying
erty that you contribute, you must first deter- 2-year period for $40,000. The FMV of the prop- them.
mine its FMV on the date of the contribution. erty on the date the option is granted is The selling price for these gems had not
This publication focuses the valuation of non- $50,000. changed from the date of purchase to the date
cash property being contributed after January In the following tax year, the university exer- Bailey donated them to charity. The best evi-
1, 2019, to a charity that qualifies under section cises the option. The FMV of the property on dence of FMV depends on actual transactions
170(c) for an income tax charitable contribution the date the option is exercised is $55,000. and not on some artificial estimate. The $5,000
deduction. Therefore, you have made a charitable contri- charged Bailey and others is, therefore, the
bution of $15,000 ($55,000, the FMV, minus
FMV. FMV is the price that property would sell $40,000, the exercise price) in the tax year the best evidence of the maximum FMV of the
gems.
for on the open market. It is the price that would option is exercised.
be agreed on between a willing buyer and a Terms of the purchase or sale. The terms of
willing seller, with neither being required to act, Determining FMV the purchase or sale should be considered in
and both having reasonable knowledge of the determining FMV if they influenced the price.
relevant facts. In addition to this general rule, Determining the value of donated property These terms include any restrictions, under-
there are special rules used to value certain would be a simple matter if you could rely only standings, or covenants limiting the use or dis-
types of property such as remainder interests, on fixed formulas, rules, or methods. Usually, it position of the property.
annuities, interests for life or for a term of years, is not that simple. Using such formulas, etc.,
and reversions, discussed below. seldom results in an acceptable determination Rate of increase or decrease in value. Un-
of FMV. There is no single formula that always less you can show that there were unusual cir-
Example 1. If you give an item of used applies when determining the value of property. cumstances, it is assumed that the increase or
clothing that is in good used condition or better decrease in the value of your donated property
to the Salvation Army, the FMV would be the This is not to say that a valuation is only from your cost has been at a reasonable rate.
price that typical buyers actually pay for clothing guesswork. You must consider all the facts and For time adjustments, an appraiser may con-
of this age, condition, style, and use. Usually, circumstances connected with the property, sider published price indexes for information on
such items are worth far less than what you such as its desirability, use, and scarcity. general price trends, building costs, commodity
paid for them.
For example, donated furniture that is in costs, securities, and works of art sold at auc-
Example 2. If you donate land and restrict good used condition or better should not be tion in arm's-length sales.
its use to agricultural purposes, you must value evaluated at some fixed rate such as 15% of the Example. Corey Brown bought a painting
the land at its value for agricultural purposes, cost of new replacement furniture. When the for $10,000. Thirteen months later, Corey gave
even if it would have a higher FMV if it were not furniture is contributed, it may be out of style or it to an art museum, claiming a charitable de-
restricted. in poor condition, therefore having little or no duction of $15,000 on their tax return. The ap-
market value. On the other hand, it may be a
Factors. In making and supporting the val- desirable antique, the value of which could not praisal of the painting should include informa-
uation of property, all factors affecting value are be determined by using any formula. tion showing that there were unusual
relevant and must be considered. These in- circumstances that justify a 50% increase in
clude, but are not limited to: Cost or Selling Price of the value for the 13 months Corey held the prop-
• The cost or selling price of the item, Donated Property erty.
• Sales of comparable properties,
• Replacement cost, and The cost of the property to you or the actual Arm's-length offer. An arm's-length offer to
• Opinions of experts. selling price received by the qualified organiza- buy the property close to the valuation date may
help to prove its value if the person making the
These factors are discussed later. Also, see tion may be the best indication of its FMV. How- offer was willing and able to complete the trans-
Table 1 for a summary of questions to ask as ever, because conditions in the market change, action. To rely on an offer, you should be able
you consider each factor. the cost or selling price of property may have
Page 2 Publication 561 (January 2023)