Thursday, December 14, 2006


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IRS Publications 526, 561 78 and Form 8283
Pub 78 Helps you identify approved organizations
Pub 561 Values of Donated Property (will probably be updated for new rules)
Pub 526 General rules
Form 8283 Form to Report Non-Cash Contributions

There are some new rules effective August 17, 2006 regarding deductions for contributions of Clothing and Household Items. The new rules specify that these non-cash contributions must have a more significant value than items such as used socks and underwear.
The Salvation Army has some guidelines you may find helpful in determining the value of your non-cash contributions.

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There are also some new rules on substantiating cash contributions.
More details regarding deductions for Clothing and Household Items and other new rulses are shown below from information I obtained from The TaxBook, an excellent, thorough, and well-organized Tax Reference resource that I use extensively. For a look, click

Charitable Deduction for Contributions of Clothing and Household Items
Current Law, TheTaxBook™ 2005 Edition
, pages 4-3 and 4-16: A taxpayer can deduct the fair market value of clothing and household goods donated to a charitable organization. Fair market value is what a willing buyer would pay a willing seller when neither has to buy or sell and both are aware of the conditions of the sale.
New Law. Effective for contributions made after August 17, 2006, no deduction is allowed for a charitable contribution of clothing or household items unless the clothing or household item is in good used condition or better. The IRS is authorized to deny by regulation a deduction for any contribution of clothing or a household item that has minimal monetary value, such as used socks and used undergarments. It is noted that the President’s Advisory Panel on Federal Tax Reform and the staff of the Joint Committee on Taxation both have concluded that the fair market value-based deduction for contributions of clothing and household items present difficult tax administration issues, as determining the correct value of an item is a fact intensive, and thus also a resource intensive matter. As recently reported by the IRS, the amount claimed as deductions in tax year 2003 for clothing and household items was more than $9 billion. It is expected that the IRS, in consultation with affected charities, will exercise assiduously the authority to disallow a deduction for some items of low value, consistent with the goals of improving tax administration and ensure that donated clothing and households items are of meaningful use to charitable organizations.
Under the provision, a deduction may be allowed for a charitable contribution of an item of clothing or a household item not in good used condition or better if the amount claimed for the item is more than $500 and the taxpayer includes with the taxpayer’s return a qualified appraisal with respect to the property. Household items include furniture, furnishings, electronics, appliances, linens, and other similar items. Food, paintings, antiques, and other objects of art, jewelry and gems, and collections are excluded from the provision.
Recordkeeping and Substantiation Requirements for Charitable Contributions
Current Law, TheTaxBook™ 2005 Edition, page 4-18: A donor who claims a deduction for a charitable contribution must maintain reliable written records regarding the contribution, regardless of the value or amount of such contribution. For a contribution of money, the donor generally must maintain one of the following: (1) a cancelled check; (2) a receipt (or a letter or other written communication) from the donee showing the name of the donee organization, the date of the contribution, and the amount of the contribution; or (3) in the absence of a cancelled check or a receipt, other reliable written records showing the name of the donee, the date of the contribution, and the amount of the contribution. For a contribution of property other than money, the donor generally must maintain a receipt from the donee organization showing the name of the donee, the date and location of the contribution, and a detailed description (but not the value) of the property. A donor of property other than money need not obtain a receipt, however, if circumstances make obtaining a receipt impracticable. Under such circumstances, the donor must maintain reliable written records regarding the contribution. The required content of such a record varies depending upon factors such as the type and value of property contributed.
In addition to the recordkeeping requirements, substantiation requirements apply in the case of charitable contributions with a value of $250 or more. No charitable deduction is allowed for any contribution of $250 or more unless the taxpayer substantiates the contribution by a contemporaneous written acknowledgement of the contribution by the donee organization. Such acknowledgement must include the amount of cash and a description (but not value) of any property other than cash contributed, whether the donee provided any goods or services in consideration for the contribution, and a good faith estimate of the value of any such goods or services. In general, if the total charitable deduction claimed for non-cash property is more than $500, the taxpayer must attach a completed Form 8283 (Noncash Charitable Contributions) to the taxpayer’s return or the deduction is not allowed. In general, taxpayers are required to obtain a qualified appraisal for donated property with a value of more than $5,000, and to attach an appraisal summary to the tax return.
New Law. For contributions made in taxable years beginning after August 17, 2006, the new law more closely aligns the substantiation rules for money to the substantiation rules for property by providing that in the case of a charitable contribution of money, regardless of the amount, applicable recordkeeping requirements are satisfied only if the donor maintains as a record of the contribution a bank record (such as a cancelled check or account statement), or a written communication from the charity showing the name of the donee organization, the date of the contribution, and the amount of the contribution. The recordkeeping requirements may not be satisfied by maintaining other written records. It is noted that currently, taxpayers are required to have a contemporaneous record of contributions of money, but that many taxpayers may not be aware of the requirement and do not keep a log of such contributions. The new law is intended to provide greater certainty in determining what may be deducted as a charitable contribution

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This information is not intended to be advice to the recipient.In compliance with Treasury Department Circular 230, unless stated to the contrary, any Federal Tax advice contained in this Blog was not intended or written to be used and cannot be used for the purposes of avoiding penalties.

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