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Surf’s up! The sun is shining, the kids are out of school, and family vacations are all in order…summer is finally here! The 2017 tax season is behind most of us (the extended due date is October 15th). This summer is the perfect time to start thinking about how non-cash donations can affect your not-for-profit organization. Grab your beach bag and let’s dive into the top three issues surrounding non-cash donations that are making waves in the not-for-profit world today.

The Top 3 Non-Cash Donation Issues to Consider:

  1. Receiving Donated Property – Written Contemporaneous Acknowledgement
    • When an organization receives cash or property, it is the donee’s responsibility to provide a contemporaneous written acknowledgement letter to the donor if the donation is over $250. The word “contemporaneous” may sound “fishy”, but it is defined as, “existing or occurring in the same period of time.” In this case it means that this statement needs to be provided to the donor before they file the tax return or when the tax return is due; whichever is earlier. Additionally, it needs to include the following information:
      • A summarized statement of any goods or services the organization provided to the donor in exchange for the contribution
      • If the above applies, then a good faith estimate of the value of the goods received in return must be included
      • Deductible amount (typically the value of the donation reduced by the value of goods and services received by the donor)
  2. Potential Consequences if a Donated Asset is Sold Within 3 Years
    • Many individuals donate assets to organizations for a tax deduction, but the organization’s intent isn’t always to use the asset to fulfill its mission. If the organization plans on selling the donated assets for cash, there are additional steps that need to be followed. If an asset is sold within three years of the donation, the organization needs to file Form 8282, Donee Information Return, unless the property is valued at $500 or less or is distributed/used for a charitable purpose. This form is required to be filed with the IRS within 125 days of the date of disposition, if not, there could be a $50 penalty per form not filed. There are additional requirements if the original donee organization sells it to another charitable organization.
  3. Accounting for Donated Assets sold for Less than the Appraised Value
    • When an organization sells an asset that had been previously received for less than its appraisal value, the accounting for the asset needs special attention. For example, an individual donates a piece of art depicting the infamous Jaws with an appraisal value of $20,000. If the portrait sells for less than its appraisal value, the difference between these two amounts becomes Contribution Revenue. This seems counter-intuitive since it’s actually decreasing the organization’s revenue. However, in this situation, it becomes imperative to notify the asset’s donor, as the IRS could adjust the deduction amount reported on their tax return. Please see our article as it pertains to the donor here.
Non-cash Donation Thresholds Contemporaneous written acknowledgement  

File form 8282

Obtain a qualified appraisal Attach appraisal to tax return when filing
$250-$500 X
= $500-$5,000 X X
= $5,000 X X X
= $500,000 X X X X

This chart is a quick overview of the non-cash donation thresholds. It provides general rules-of-thumb for the donor and donee when receiving or making non-cash donations.

Sunsetting Thoughts

The above scenarios are important to consider, both as the donor and the donee. Taking some time to think about these situations could be beneficial to saving time and money in the future. Whether it’s laying out in the sun, enjoying long walks on the beach, or spending time with family, summer time is all about making waves and staying cool on what’s important in the not-for-profit world today. If you have any questions, please do not hesitate to contact your L&B professional at (858) 558-9200.

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