Jacobson v. Commissioner, T.C. Memo. 1999-401 (1999)
A taxpayer claimed a deduction of $950,000 for contributions of several items of property he made to a church. The donated items included historical books and paintings. The taxpayer completed a Form 8283 on which he listed the donated items and his estimate of their market value, but he did not obtain an appraisal for any of the items. The IRS audited the taxpayer, and allowed a charitable contribution deduction of only $12,900.
On appeal, the Tax Court agreed with the IRS. It noted that the taxpayer failed to obtain a qualified appraisal of the donated items within the time limits specified by law. In general, persons who donate property valued at more than $5,000 must obtain a qualified appraisal no later than the date they file the tax return on which the contribution deduction is claimed. The taxpayer retained an appraiser only after his tax return was audited. Further, the court noted that the appraiser’s valuations were not credible, since “he gave no persuasive explanation of his methodology, made no reference to comparable sales or a valuation rationale, and made no reference to any experience he had that would support the values at which he arrived. Without any reasoned analysis, his report is useless. His opinions are so exaggerated that his testimony is not credible.”
The court also pointed out that the appraiser’s valuation was not supported by the donor’s actions: “The contributed property was stored in boxes on pallets for many years in a bakery warehouse that only had limited security. The warehouse had a rodent problem and was described as being extremely hot during the summer. The contributed property was not insured, nor was any special precaution taken to preclude loss due to deterioration, theft, or fire.” Such behavior, the court concluded, “renders implausible his claim that the property had substantial value,” since “if the contributed property had a value of $950,000 or anything approaching that value … [the donor] would have treated it with more care.”
Tip. Do not assume that donors are familiar with the substantiation rules that apply to gifts of noncash property. Church treasurers should obtain several copies of Form 8283 each January to give to persons who donate noncash property to the church during the year. You can order multiple copies of Form 8283 by calling the IRS forms hotline at 1-800-TAX-FORM.
Tip. Consider contacting donors of noncash property by the end of the year to be sure that they have obtained a qualified appraisal—if you believe they claimed a charitable contribution deduction of more than $5,000.
