Qualified Appraisal
Generally, if the claimed deduction for an item or group of similar
items of donated property is more than $5,000, you must get a
qualified appraisal made by a qualified appraiser and you must attach
an appraisal summary to your tax return. See Deductions of More
Than $5,000, earlier.
A qualified appraisal is an appraisal document that:
- Relates to an appraisal made not earlier than 60 days prior
to the date of contribution of the appraised property,
- Does not involve a prohibited appraisal fee,
- Includes certain information (covered later), and
- Is prepared, signed, and dated by a qualified appraiser
(defined later).
You must receive the qualified appraisal before the due date,
including extensions, of the return on which a charitable contribution
deduction is first claimed for the donated property. If the deduction
is first claimed on an amended return, the qualified appraisal must be
received before the date on which the amended return is filed.
An appraisal summary (discussed later) must be attached to your tax
return. Generally, you do not need to attach the qualified appraisal
itself, but you should keep a copy as long as it may be relevant under
the tax law. If you donated art valued at $20,000 or more, however,
you must attach a complete copy of the signed appraisal. See
Paintings, Antiques, and Other Objects of Art, discussed
earlier under Valuation of Various Kinds of Property.
Prohibited appraisal fee.
Generally, no part of the fee arrangement for a qualified appraisal
can be based on a percentage of the appraised value of the property.
If a fee arrangement is based on what is allowed as a deduction, after
Internal Revenue Service examination or otherwise, it is treated as a
fee based on a percentage of appraised value. However, appraisals are
not disqualified when an otherwise prohibited fee is paid to a
generally recognized association that regulates appraisers if:
- The association is not organized for profit and no part of
its net earnings benefits any private shareholder or
individual,
- The appraiser does not receive any compensation from the
association or any other persons for making the appraisal, and
- The fee arrangement is not based in whole or in part on the
amount of the appraised value that is allowed as a deduction after an
Internal Revenue Service examination or otherwise.
Information included in qualified appraisal.
A qualified appraisal must include the following information:
- A description of the property in sufficient detail for a
person who is not generally familiar with the type of property to
determine that the property appraised is the property that was (or
will be) contributed,
- The physical condition of any tangible property,
- The date (or expected date) of contribution,
- The terms of any agreement or understanding entered into (or
expected to be entered into) by or on behalf of the donor that relates
to the use, sale, or other disposition of the donated property,
- The name, address, and taxpayer identification number of the
qualified appraiser and, if the appraiser is a partner, an employee,
or an independent contractor engaged by a person other than the donor,
the name, address, and taxpayer identification number of the
partnership or the person who employs or engages the appraiser,
- The qualifications of the qualified appraiser who signs the
appraisal, including the appraiser's background, experience,
education, and any membership in professional appraisal
associations,
- A statement that the appraisal was prepared for income tax
purposes,
- The date (or dates) on which the property was valued,
- The appraised FMV on the date (or expected date) of
contribution,
- The method of valuation used to determine FMV, such as the
income approach, the comparable sales or market data approach, or the
replacement cost less depreciation approach, and
- The specific basis for the valuation, such as any specific
comparable sales transaction.
Art objects.
The following are examples of information that should be included
in a description of donated property. These examples are for art
objects. A similar detailed breakdown should be given for other
property. Appraisals of art objects - paintings in
particular - should include:
- A complete description of the object, indicating the:
- Size,
- Subject matter,
- Medium,
- Name of the artist (or culture), and
- Approximate date created.
- The cost, date, and manner of acquisition.
- A history of the item, including proof of
authenticity.
- A photograph of a size and quality fully showing the object,
preferably a 10 × 12 inch print.
- The facts on which the appraisal was based, such as:
- Sales or analyses of similar works by the artist,
particularly on or around the valuation date.
- Quoted prices in dealer's catalogs of the artist's works or
works of other artists of comparable stature.
- A record of any exhibitions at which the specific art object
had been displayed.
- The economic state of the art market at the time of
valuation, particularly with respect to the specific property.
- The standing of the artist in his profession and in the
particular school or time period.
Number of qualified appraisals.
A separate qualified appraisal is required for each item of
property that is not included in a group of similar items of property.
You need only one qualified appraisal for a group of similar items of
property contributed in the same tax year, but you may get separate
appraisals for each item. A qualified appraisal for a group of similar
items must provide all of the required information for each item of
similar property. The appraiser, however, may provide a group
description for selected items, the total value of which is not more
than $100.
Qualified appraiser.
A qualified appraiser is an individual who declares on the
appraisal summary that he or she:
- Holds himself or herself out to the public as an appraiser
or performs appraisals on a regular basis,
- Is qualified to make appraisals of the type of property
being valued because of his or her qualifications described in the
appraisal,
- Is not an excluded individual, and
- Understands that an intentionally false overstatement of the
value of property may subject him or her to the penalty for aiding and
abetting an understatement of tax liability.
An appraiser must complete Part III of Section B (Form 8283) to be
considered a qualified appraiser. More than one appraiser may appraise
the property, provided that each complies with the requirements,
including signing the qualified appraisal and appraisal summary.
Excluded individuals.
The following persons cannot be qualified appraisers with respect
to particular property:
- The donor of the property, or the taxpayer who claims the
deduction.
- The donee of the property.
- A party to the transaction in which the donor acquired the
property being appraised, unless the property is donated within 2
months of the date of acquisition and its appraised value does not
exceed its acquisition price. This applies to the person who sold,
exchanged, or gave the property to the donor, or any person who acted
as an agent for the transferor or donor in the transaction.
- Any person employed by, married to, or related under section
267(b) of the Internal Revenue Code, to any of the above persons. For
example, if the donor acquired a painting from an art dealer, neither
the dealer nor persons employed by the dealer can be qualified
appraisers for that painting.
- An appraiser who appraises regularly for a person in (1),
(2), or (3), and who does not perform a majority of his or her
appraisals made during his or her tax year for other persons.
In addition, a person is not a qualified appraiser for a particular
donation if the donor had knowledge of facts that would cause a
reasonable person to expect the appraiser to falsely overstate the
value of the donated property. For example, if the donor and the
appraiser make an agreement concerning the amount at which the
property will be valued, and the donor knows that such amount exceeds
the FMV of the property, the appraiser is not a qualified appraiser
for the donation.
Penalties.
Any appraiser who falsely or fraudulently overstates the value of
property described in a qualified appraisal or an appraisal summary
that the appraiser has signed may be subject to a civil penalty for
aiding and abetting an understatement of tax liability, and may have
his or her appraisal disregarded.
Appraisal Summary
Generally, if the claimed deduction for an item of donated property
is more than $5,000, you must attach an appraisal summary (Form 8283)
to your tax return. Only a partially completed appraisal summary is
required in some situations. See Deductions of More Than $5,000,
earlier.
Note:
If you deduct $20,000 or more for donated art, you must attach a
complete copy of the signed appraisal. See Paintings, Antiques,
and Other Objects of Art, discussed earlier under Valuation
of Various Kinds of Property.
Form 8283.
Section B of Form 8283 is the appraisal summary. If you do not
attach the form to your return, the deduction will not be allowed
unless your failure to attach it was due to a good faith omission. If
the IRS requests that you submit the form because you did not attach
it to your return, you must comply within 90 days of the request or
the deduction will be disallowed.
You must attach a separate Form 8283 for each item of contributed
property that is not part of a group of similar items. If you
contribute similar items of property to the same donee organization,
you need attach only one Form 8283 for those items. If you contribute
similar items of property to more than one donee organization, you
must attach a separate form for each donee.
Internal Revenue Service Review of Appraisals
In reviewing an income tax return, the Service may accept the
claimed value of the donated property, based on information or
appraisals sent with the return, or may make its own determination of
FMV. In either case, the Service may:
- Contact the taxpayer to get more information,
- Refer the valuation problem to a Service appraiser or
valuation specialist,
- Refer the issue to the Commissioner's Art Advisory Panel (a
25-member group of dealers and museum directors who review and
recommend acceptance or adjustment of taxpayers' claimed values for
major paintings and sculptures, Far Eastern and Asian art, Primitive
and Pre-Columbian art), or
- Contract with an independent dealer, scholar, or appraiser
to appraise the property when the objects require appraisers of highly
specialized experience and knowledge.
Responsibility of the Service.
The Service is responsible for reviewing appraisals, but it is not
responsible for making them. Supporting the FMV listed on your return
is your responsibility.
The Service does not accept appraisals without question.
Nor does the Service recognize any particular appraiser or
organization of appraisers.
Timing of Service action.
The Service generally does not approve valuations or appraisals
before the actual filing of the tax return to which the appraisal
applies. In addition, the Service generally does not issue advance
rulings approving or disapproving such appraisals.
Exception.
On January 16, 1996, the Service began accepting requests for a
Statement of Value for a donated item of art appraised at
$50,000 or more. For a request submitted as described earlier under
Art valued at $50,000 or more, the Service will issue a
Statement of Value that can be relied on by the donor of the item of
art.
Penalties
You may be liable for a penalty if you overstate the value or
adjusted basis of donated property.
20% penalty.
The penalty is 20% of the underpayment of tax related to the
overstatement if:
- The value or adjusted basis claimed on the return is 200%
or more of the correct amount, and
- You underpaid your tax by more than $5,000 because of the
overstatement.
40% penalty.
The penalty is 40%, rather than 20%, if:
- The value or adjusted basis claimed on the return is 400% or
more of the correct amount, and
- You underpaid your tax by more than $5,000 because of the
overstatement.
How To Get More Information
You can order free publications and forms, ask tax questions, and
get more information from the IRS in several ways. By selecting the
method that is best for you, you will have quick and easy access to
tax help.
Free tax services.
To find out what services are available, get Publication 910,
Guide to Free Tax Services. It contains a list of free tax
publications and an index of tax topics. It also describes other free
tax information services, including tax education and assistance
programs and a list of TeleTax topics.
Personal computer. With your personal computer and
modem, you can access the IRS on the Internet at
www.irs.gov. While visiting our web site, you can select:
- Frequently Asked Tax Questions (located under
Taxpayer Help & Ed) to find answers to questions you
may have.
- Forms & Pubs to download forms and
publications or search for forms and publications by topic or
keyword.
- Fill-in Forms (located under Forms &
Pubs) to enter information while the form is displayed and then
print the completed form.
- Tax Info For You to view Internal Revenue
Bulletins published in the last few years.
- Tax Regs in English to search regulations and the
Internal Revenue Code (under United States Code
(USC)).
- Digital Dispatch and IRS Local News Net
(both located under Tax Info For Business) to receive
our electronic newsletters on hot tax issues and news.
- Small Business Corner (located under Tax
Info For Business) to get information on starting and operating
a small business.
You can also reach us with your computer using File Transfer
Protocol at ftp.irs.gov.
TaxFax Service. Using the phone attached to your fax
machine, you can receive forms and instructions by calling
703-368-9694. Follow the directions from the
prompts. When you order forms, enter the catalog number for the form
you need. The items you request will be faxed to you.
Phone. Many services are available by phone.
- Ordering forms, instructions, and publications.
Call 1-800-829-3676 to order
current and prior year forms, instructions, and publications.
- Asking tax questions. Call the IRS with your tax
questions at 1-800-829-1040.
- TTY/TDD equipment. If you have access to TTY/TDD
equipment, call 1-800-829- 4059 to ask
tax questions or to order forms and publications.
- TeleTax topics. Call
1-800-829-4477 to listen to pre-recorded
messages covering various tax topics.
Evaluating the quality of our telephone services. To
ensure that IRS representatives give accurate, courteous, and
professional answers, we evaluate the quality of our telephone
services in several ways.
- A second IRS representative sometimes monitors live
telephone calls. That person only evaluates the IRS assistor and does
not keep a record of any taxpayer's name or tax identification
number.
- We sometimes record telephone calls to evaluate IRS
assistors objectively. We hold these recordings no longer than one
week and use them only to measure the quality of assistance.
- We value our customers' opinions. Throughout this year, we
will be surveying our customers for their opinions on our
service.
Walk-in. You can walk in to many post offices,
libraries, and IRS offices to pick up certain forms, instructions, and
publications. Also, some libraries and IRS offices have:
- An extensive collection of products available to print from
a CD-ROM or photocopy from reproducible proofs.
- The Internal Revenue Code, regulations, Internal Revenue
Bulletins, and Cumulative Bulletins available for research
purposes.
Mail. You can send your order for forms, instructions,
and publications to the Distribution Center nearest to you and receive
a response within 10 workdays after your request is received. Find the
address that applies to your part of the country.
- Western part of U.S.:
Western Area Distribution Center
Rancho Cordova, CA 95743-0001
- Central part of U.S.:
Central Area Distribution Center
P.O. Box 8903
Bloomington, IL 61702-8903
- Eastern part of U.S. and foreign addresses:
Eastern Area Distribution Center
P.O. Box 85074
Richmond, VA 23261-5074
CD-ROM. You can order IRS Publication 1796, Federal
Tax Products on CD-ROM, and obtain:
- Current tax forms, instructions, and publications.
- Prior-year tax forms, instructions, and publications.
- Popular tax forms which may be filled in electronically,
printed out for submission, and saved for recordkeeping.
- Internal Revenue Bulletins.
The CD-ROM can be purchased from National Technical Information
Service (NTIS) by calling 1-877-233-6767
or on the Internet at www.irs.gov/cdorders. The
first release is available in mid-December and the final release is
available in late January.
IRS Publication 3207, Small Business Resource Guide, is
an interactive CD-ROM that contains information important to small
businesses. It is available in mid-February. You can get one free copy
by calling 1-800-829-3676.
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