9062 / What appraisal requirements may be required in connection with substantiating a charitable deduction that exceeds certain valuation thresholds?
(1) Obtains a qualified appraisal of the property; and(2) Attaches to the tax return information regarding the property and the appraisal (as the Secretary may require).1
Donors who claim a deduction for a charitable gift of property (except publicly traded securities) valued in excess of $5,000 ($10,000 for nonpublicly traded stock) are required to obtain a qualified appraisal report, attach an appraisal summary (containing the information specified in regulations) to their return for the year in which the deduction is claimed, and maintain records of certain information related to the contribution.2
If a taxpayer fails to obtain the required appraisal for a gift of nonpublicly traded stock, the IRS may deny the deduction even if it does not dispute the value of the gift.3 The Tax Court distinguished its holding in Hewitt from a 1993 decision in which it had permitted a deduction to a taxpayer who substantially, though not fully, complied with the appraisal requirement. In the earlier ruling, the taxpayer had obtained an appraisal from a qualified appraiser, completed and attached Form 8283, but had failed to include all the information required of an appraisal summary.4 The Fourth Circuit agreed with the Tax Court’s analysis, stating that “Bond does not suggest that a taxpayer who completely fails to observe the appraisal regulations has substantially complied with them.” The Fourth Circuit further found that a deduction may still be permitted in situations where the taxpayers make a good faith effort to comply with the appraisal requirements, but that the deduction will be denied for taxpayers who ignore the requirement entirely. (For more information about the appraisal and summary requirements, see the instructions for Schedule A, Form 1040, and IRS Publication 526, Charitable Contributions.)