A couple made a gift of privately-held corporate stock to a charity, and claimed a charitable contribution deduction in the amount of $500,000. The couple based this amount on the opinion of a stock broker who occasionally traded the stock. The Tax Court ruled that the couple could not deduct any amount for the gift of stock because they failed to comply with the substantiation requirements that apply to gifts of privately-held stock. In brief, gifts of privately-held stock (valued at more than $10,000) are not deductible unless (1) the donor obtains a qualified appraisal of the donated shares no earlier than sixty days prior to the date of the contribution; and (2) the donor completes a “qualified appraisal summary” (IRS Form 8283) and encloses it with the Form 1040 on which the contribution deduction is claimed. Note that the donee (church or other charity) must sign this appraisal summary. In this case, the couple did not obtain a qualified appraisal, and did not attach a Form 8283 appraisal summary to their tax return. The court concluded, “We find that the couple failed to meet the substantiation requirements. Accordingly … no charitable deductions are allowed to them on account of the transfer of the shares.” Todd v. Commissioner, 118 T.C. No. 19 (2002).
Key point. Publicly traded stock is not subject to these substantiation requirements since its value is readily ascertainable. Contributions of nonpublicly traded stock (i.e., stock held by most small, family owned corporations) are subject to these requirements but only if the value claimed by the donor exceeds $10,000.
This article first appeared in Church Treasurer Alert, July 2002.