Charitable Gifts

November 04, 2024

8072 / Can an individual deduct the fair market value of appreciated real estate or intangible personal property such as stocks or bonds given to a charity?

<div class="Section1">If an individual makes a charitable contribution of real property or intangible personal property to a public charity, the sale of which would have resulted in long-term capital gain (see below), the taxpayer is generally entitled to deduct the full fair market value of the property. However, the deduction for the gift is limited to the lesser of 30 percent of adjusted gross income or the unused portion of the 60 percent limit (see Q <a href="javascript:void(0)" class="accordion-cross-reference" id="9065">9065</a>).<a href="#_ftn1" name="_ftnref1">1</a><div class="Section1"> A deduction denied because it exceeds 30 percent of the individual’s adjusted gross income may be carried over and treated as a contribution of capital gain property in each of the next five years.<a href="#_ftn2" name="_ftnref2">2</a> <blockquote>Example: In 2022, Jaclyn had adjusted gross income of $600,000. She made a charitable contribution of long-term capital gain stock worth $200,000 to her church. Her deduction is limited to $180,000 (30 percent of $600,000). In 2023, Jaclyn’s adjusted gross income is $700,000. She contributes $100,000 worth of long-term capital gain bonds to the church. She may deduct $120,000 in 2023 ($100,000 plus $20,000 carried forward from 2022), since the total does not exceed 30 percent of her adjusted gross income for 2023 ($210,000).</blockquote> An individual may elect to take a gift of long-term capital gain property into account at its adjusted basis instead of its fair market value. If the taxpayer makes this election, the income percentage limit for the contribution is increased to 60 percent instead of 30 percent. However, such an election applies to all such contributions made during the taxable year.<a href="#_ftn3" name="_ftnref3">3</a> The election is generally irrevocable.<a href="#_ftn4" name="_ftnref4">4</a> If the charitable contribution consists of property that, if sold at the time of the contribution, would result in income that would not otherwise qualify for long-term capital gain treatment (such as short-term capital gain property), the deduction must be reduced by the amount of gain that would not be long-term capital gain.<a href="#_ftn5" name="_ftnref5">5</a> If the entire gain would be income other than long-term capital gain, the allowable deduction would be limited to the taxpayer’s adjusted basis in the contributed property. Special rules apply to charitable contributions of S corporation stock in determining whether gain on the stock would have been long-term capital gain if the stock were sold by the taxpayer.<a href="#_ftn6" name="_ftnref6">6</a> Donors making charitable contributions of the long-term capital gain portion of futures contracts must mark the contracts to market as of the dates the contracts are transferred to the donee and recognize the accrued long-term capital gains as income.<a href="#_ftn7" name="_ftnref7">7</a> The amount of taxable gain or deductible loss recognized by the transferor at the time of the charitable transfer equals the difference between the fair market value of the futures contract at the time of the transfer and the transferor’s tax basis in the futures contract, as adjusted under IRC Section 1256(a)(2), to account for gains and losses already recognized in prior tax years under the mark to market rules.<a href="#_ftn8" name="_ftnref8">8</a> In one case, taxpayers who transferred appreciated stock to charitable organizations in the midst of an ongoing tender offer and merger were taxed on the gain on the stock under the “anticipatory assignment of income doctrine” where the charitable gifts occurred after the taxpayers’ interests in a corporation had ripened into rights to receive cash.<a href="#_ftn9" name="_ftnref9">9</a> But where taxpayers assigned warrants to four charities after receiving a letter announcing that all issued and outstanding stock of the company would be purchased, the Tax Court held that under Revenue Ruling 78-197<a href="#_ftn10" name="_ftnref10">10</a> the IRS could treat the proceeds of the sales of the warrants by the charities as income to the donors only if at the time the assignments took place, the charitable donees were legally bound or could be compelled to sell the warrants.<a href="#_ftn11" name="_ftnref11">11</a> A taxpayer who donated stock to a supporting organization where the voting rights had been transferred for a business purpose to a third party many years ago was permitted to claim a charitable deduction.<a href="#_ftn12" name="_ftnref12">12</a> </div><div class="refs"> <hr align="left" size="1" width="33%"> <a href="#_ftnref1" name="_ftn1">1</a>.  See IRC § 170(b)(1)(C); Treas. Reg. § 1.170A-8(d)(1). <a href="#_ftnref2" name="_ftn2">2</a>.  IRC §§ 170(b)(1)(C); Treas. Reg. § 1.170A-10(c). <a href="#_ftnref3" name="_ftn3">3</a>.  IRC §§ 170(b)(1)(C)(iii), 170(e)(1). <a href="#_ftnref4" name="_ftn4">4</a>.  Woodbury v. Comm., 90-1 USTC ¶ 50,199 (10th Cir. 1990), aff’g TC Memo 1988-272. <a href="#_ftnref5" name="_ftn5">5</a>.  IRC § 170(e)(1)(A); Treas. Reg. § 1.170A-4(a). <a href="#_ftnref6" name="_ftn6">6</a>.  IRC § 170(e)(1). <a href="#_ftnref7" name="_ftn7">7</a>.  Greene v. U.S., 79 F.3d 1348 (2d Cir. 1996). <a href="#_ftnref8" name="_ftn8">8</a>.  Greene v. U.S., 185 F.3d 67, 84 AFTR 2d 99-5415 (2d Cir. 1999). <a href="#_ftnref9" name="_ftn9">9</a>.  See Ferguson v. Comm., 174 F.3d 997 (9th Cir. 1999). <a href="#_ftnref10" name="_ftn10">10</a>.  1978-1 CB 83. <a href="#_ftnref11" name="_ftn11">11</a>.  Rauenhorst v. Comm., 119 TC 157 (2002). <a href="#_ftnref12" name="_ftn12">12</a>.  Let Rul. 200108012. </div></div>

March 13, 2024

8056 / What general rules apply to charitable deductions?

<div class="Section1"> Editor’s Note: The CARES Act made several changes designed to encourage charitable giving during the COVID-19 outbreak. For the 2020 and 2021 tax years, the CARES Act amended IRC Section 62(a), allowing taxpayers to reduce adjusted gross income (AGI) by $300 worth of charitable contributions made in 2020 and 2021 even if they did not itemize ($600 for married taxpayers filing joint returns). Editor’s Note: Under normal circumstances, taxpayers are only permitted to deduct cash contributions to charity to the extent those donations do not exceed 60 percent of AGI (10 percent for corporations). The CARES Act lifted the 60 percent AGI limit for 2020 and 2021. In other words, cash contributions to public charities and certain private foundations in 2020 and 2021 were not subject to an AGI limit. Individual taxpayers could offset their income for 2020 and 2021 up to the full amount of their AGI, and additional charitable contributions could be carried over to offset income in a later year (the amounts are not refundable). The corporate AGI limit was raised to 25 percent (excess contributions also carry over to subsequent tax years). An individual may deduct certain amounts for charitable contributions.<a href="#_ftn1" name="_ftnref1">1</a> The amount of a contribution of property other than money is generally equal to the fair market value of the property.<a href="#_ftn2" name="_ftnref2">2</a> However, under certain circumstances, the deduction for a gift of property must be reduced; see Q <a href="javascript:void(0)" class="accordion-cross-reference" id="8073">8073</a>. For guidelines concerning the determination of fair market value, see Q <a href="javascript:void(0)" class="accordion-cross-reference" id="8057">8057</a>. The amount that may be deducted in any one year is subject to certain income percentage limits that depend on the type of property, the type of charitable organization to which the gift is made, and whether the contribution is made directly “to” the charity or “for the use of” the charity (see Q <a href="javascript:void(0)" class="accordion-cross-reference" id="8070">8070</a>). An individual who does not itemize deductions may not take a charitable deduction. As a general rule, a gift of less than an individual’s entire interest in property is not deductible, but certain exceptions are provided (see Q <a href="javascript:void(0)" class="accordion-cross-reference" id="8077">8077</a>, Q <a href="javascript:void(0)" class="accordion-cross-reference" id="8087">8087</a>, and Q <a href="javascript:void(0)" class="accordion-cross-reference" id="8105">8105</a>). For a charitable contribution to be deductible, the charity must receive some benefit from the donated property.<a href="#_ftn3" name="_ftnref3">3</a> In addition, the donor cannot expect to receive some economic benefit (aside from the tax deduction) from the charity in return for the donation.<a href="#_ftn4" name="_ftnref4">4</a> For instance, if a taxpayer contributes substantially appreciated property, and later reacquires it from the charity under a prearrangement, or if the charity sells the appreciated property and uses the proceeds to purchase other property from the taxpayer under a similar arrangement, the taxpayer recognizes gain on the contribution.<a href="#_ftn5" name="_ftnref5">5</a> However, where there is no arrangement, and no duty on the part of the charity to return the property to the donor, the taxpayer is entitled to a deduction. In addition, if the charity does return the property, the taxpayer receives a new basis in the property (i.e., the price he paid to reacquire it).<a href="#_ftn6" name="_ftnref6">6</a> Generally, if a taxpayer makes a payment or transfers property to or for the use of a Section 170(c) entity, the amount of the taxpayer’s charitable contribution deduction under Section 170(a) is reduced by the amount of any state or local tax credit that the taxpayer receives or expects to receive in consideration for the taxpayer’s payment or transfer. This rule does not apply to any payment or transfer of property if the total amount of the state and local tax credits received or expected to be received by the taxpayer is 15 percent or less of the taxpayer’s payment, or 15 percent or less of the fair market value of the property transferred by the taxpayer. If a taxpayer makes a payment or transfers property to or for the use of a Section 170(c) charity, and the taxpayer receives or expects to receive state or local tax deductions that do not exceed the amount of the taxpayer’s payment or the fair market value of the property transferred by the taxpayer to the entity, the taxpayer is not required to reduce its charitable contribution deduction under Section 170(a) on account of the state or local tax deductions. If the taxpayer receives or expects to receive a state or local tax deduction that exceeds the amount of the taxpayer’s payment or the fair market value of the property transferred, the taxpayer’s charitable contribution deduction under Section 170(a) is reduced.<a href="#_ftn7" name="_ftnref7">7</a> In determining whether a payment that is partly in consideration for goods or services (i.e., a quid pro quo contribution) qualifies as a charitable deduction, the IRS has adopted the 2-part test set forth in United States v. American Bar Endowment.<a href="#_ftn8" name="_ftnref8">8</a> In order for a charitable contribution to be deductible, a taxpayer must (1) intend to make a payment in excess of the fair market value of the goods or services received, and (2) actually make a payment in an amount that exceeds the fair market value of the goods or services.<a href="#_ftn9" name="_ftnref9">9</a> The deduction amount may not exceed the excess of (1) the amount of any cash paid and the fair market value of the goods or services; over (2) the fair market value of the goods or services provided in return.<a href="#_ftn10" name="_ftnref10">10</a> The Tax Court has held that tuition payments paid by taxpayers to religious day schools for the secular and religious education of their children were not deductible as a charitable contribution, including amounts paid to one of the schools for after-school religious education classes.<a href="#_ftn11" name="_ftnref11">11</a> Where a company transfers an amount it holds on a taxpayer’s behalf to a charity: (1) the payment received by the company from the Internet vendor is a rebate (resulting from prior purchases from the vendor) and, thus, is not includable in the taxpayer’s gross income; and (2) the amount transferred is a charitable contribution that is deductible by the taxpayer in the year that the company (acting as the taxpayer’s agent) transfers the taxpayer’s rebate to charity.<a href="#_ftn12" name="_ftnref12">12</a> Certain goods or services received in return for a charitable contribution may be disregarded for purposes of determining whether a taxpayer has made a charitable contribution, the amount of any charitable contribution, and whether any goods or services have been provided that must be substantiated or disclosed.<a href="#_ftn13" name="_ftnref13">13</a> These items include goods or services that have an insubstantial value under IRS guidelines ($13.60 in 2025, $13.20 in 2024 and $12.50 in 2023), certain annual membership benefits, and certain admissions to events.<a href="#_ftn14" name="_ftnref14">14</a> Prior to 2018, if an otherwise deductible charitable contribution to a university (or other institution of higher learning) directly or indirectly entitled the donor to purchase tickets for athletic events in a stadium of the institution, the contribution was 80 percent deductible, to the extent that the contribution is not a payment for the tickets themselves.<a href="#_ftn15" name="_ftnref15">15</a> No such deduction is allowed for tax years beginning after 2017. Prior to 2018, the Service had determined that the portion of the payment made to a state university’s foundation, for which the donor (an S corporation) received the right to purchase tickets for seating in a skybox at athletic events in an athletic stadium of the university, was deductible under IRC Section 170(l). The Service reasoned that the portion of the payment to the foundation for the right to buy the tickets for seating was considered as being paid for the benefit of the university; thus, 80 percent of such portion was deductible. The Service also stated that the remainder of the payment (consisting of the ticket purchase, the right to use the skybox, the passes to visit the skybox, and the parking privileges) was not deductible.<a href="#_ftn16" name="_ftnref16">16</a> The IRS has ruled privately that contributions made to a university for the purpose of constructing a building providing meeting space for campus organizations qualified for a charitable deduction under IRC Section 170. With the exception of the meeting rooms leased to individual sororities, the facilities in the building would be open to all students. Because the facts indicated that the contributions were indeed gifts to the college, and not gifts to the sororities using the college as a conduit, the Service determined that the requirements of Revenue Ruling 60-37<a href="#_ftn17" name="_ftnref17">17</a> had been satisfied.<a href="#_ftn18" name="_ftnref18">18</a> Charitable split dollar. Responding to perceived abuses, in 1999 Congress passed legislation that denies a charitable deduction for certain transfers associated with split dollar insurance arrangements.<a href="#_ftn19" name="_ftnref19">19</a> Charitable split dollar insurance reporting requirements are set forth in Notice 2000-24.<a href="#_ftn20" name="_ftnref20">20</a> For the split dollar rules, see Treasury Regulation Section 1.7872-15.<a href="#_ftn21" name="_ftnref21">21</a> See also Roark v. Comm.<a href="#_ftn22" name="_ftnref22">22</a> (denying charitable income tax deductions where charitable split dollar life insurance policies were involved). <div class="refs"> <hr align="left" size="1" width="33%"> <a href="#_ftnref1" name="_ftn1">1</a>.     IRC § 170(a). <a href="#_ftnref2" name="_ftn2">2</a>.     Treas. Reg. § 1.170A-1(c)(1). <a href="#_ftnref3" name="_ftn3">3</a>.     Winthrop v. Meisels, 180 F. Supp. 29 (D.C.N.Y. 1959), aff’d, 281 F.2d 694 (2d Cir. 1960). <a href="#_ftnref4" name="_ftn4">4</a>.     Stubbs v. U.S., 428 F.2d 885, 70-2 USTC ¶ 9468 (9th Cir. 1970), cert. den., 400 U.S. 1009 (1971). <a href="#_ftnref5" name="_ftn5">5</a>.     Blake v. Comm., 697 F.2d 473, 83-1 USTC ¶ 9121 (2d Cir. 1982). <a href="#_ftnref6" name="_ftn6">6</a>.     Sheppard v. U.S., 361 F.2d 972 (Ct. Cl. 1966). <a href="#_ftnref7" name="_ftn7">7</a>.     Treas. Reg. § 1.170A-1(h). <a href="#_ftnref8" name="_ftn8">8</a>.     477 U.S. 105 (1986). <a href="#_ftnref9" name="_ftn9">9</a>.     Treas. Reg. § 1.170A-1(h)(1). <a href="#_ftnref10" name="_ftn10">10</a>.   Treas. Reg. § 1.170A-1(h)(2). <a href="#_ftnref11" name="_ftn11">11</a>.   Sklar v. Comm., 125 TC 281 (2005); see also Sklar v. Comm., 282 F.3d 610 (9th Cir. 2002), aff’g, TC Memo 2000-118. <a href="#_ftnref12" name="_ftn12">12</a>.   Let. Rul. 200142019. See also Let. Ruls. 200228001, 200230039. <a href="#_ftnref13" name="_ftn13">13</a>.   Treas. Reg. §§ 1.170A-1(h), 1.170A-13(f)(8). <a href="#_ftnref14" name="_ftn14">14</a>.   Treas. Reg. § 1.170A-13(f)(8). See also Rev. Proc. 2022-38, Rev. Proc. 2023-34, Rev. Proc. 2024-40. <a href="#_ftnref15" name="_ftn15">15</a>.   IRC § 170(l). <a href="#_ftnref16" name="_ftn16">16</a>.   TAM 200004001. <a href="#_ftnref17" name="_ftn17">17</a>.   1960-2 CB 73. <a href="#_ftnref18" name="_ftn18">18</a>.   Let. Rul. 9829053. See also Let. Ruls. 200003013, 199929050. <a href="#_ftnref19" name="_ftn19">19</a>.   IRC § 170(a)(10); see also Notice 99-36, 1999-26 CB 1284. <a href="#_ftnref20" name="_ftn20">20</a>.   2000-1 CB 952. <a href="#_ftnref21" name="_ftn21">21</a>.   TD 9092, 68 Fed. Reg. 54336 (9-17-2003); Notice 2002-8, 2002-1 CB 398. <a href="#_ftnref22" name="_ftn22">22</a>.   TC Memo 2004-271; Addis v. Comm., 2004-2 USTC ¶ 50,291 (9th Cir. 2004) (cert. denied), aff’g, 118 TC 528 (2002); and Weiner v. Comm., TC Memo 2002-153, cert. denied. </div></div>

March 13, 2024

8091 / To qualify as a charitable remainder unitrust, how frequently must the payouts be made?

<div class="Section1">To qualify as a charitable remainder unitrust, the trust must pay its unitrust amount to the noncharitable beneficiary at least annually. The unitrust amount for fixed percentage CRUTs may be paid within a reasonable time after the close of the year for which it is due if either of the following occur: (a) the character of the unitrust amount in the recipient’s hands is income under IRC Section 664(b)(1), (2), or (3); or (b) the trust distributes property (other than cash) that it owned as of the close of the taxable year to pay the unitrust amount, and the trustee elects to treat any income generated by the distribution as occurring on the last day of the taxable year for which the amount is due. Additionally, for fixed percentage CRUTs that were created before December 10, 1998, the unitrust amount may be paid within a reasonable time after the close of the taxable year for which it is due if the percentage used to calculate the unitrust amount is 15 percent or less.<a href="#_ftn1" name="_ftnref1">1</a><div class="refs"> <hr align="left" size="1" width="33%"> <a href="#_ftnref1" name="_ftn1">1</a>.Treas. Reg. § 1.664(a)(1)(i). </div></div>

March 13, 2024

8058 / What verification is required to substantiate a deduction for a charitable contribution of money? What enhanced recordkeeping requirements apply for contributions of money?

<div class="Section1"> A charitable contribution is allowable as a deduction only if verified as required under regulations.<a href="#_ftn1" name="_ftnref1">1</a> A charitable deduction is not allowed for any contribution of a check, cash, or other monetary gift unless the donor retains a bank record or a written communication from the charity showing the name of the charity and the date and the amount of the contribution.<a href="#_ftn2" name="_ftnref2">2</a> The IRS has issued guidance on how charitable contributions made by payroll deduction may meet the requirements of IRC Section 170(f)(17). The Service clarified that unlike IRC Section 170(g)(8), which only applies to contributions of $250 or more (see Q <a href="javascript:void(0)" class="accordion-cross-reference" id="8059">8059</a>), IRC Section 170(f)(17) applies to any contribution of a cash, check, or other monetary gift. For a charitable contribution made by payroll deduction, a pay stub, Form W, or other employer-furnished document that sets forth the amount withheld for payment to a donee organization, along with a pledge card prepared by or at the direction of the donee organization, will be deemed to be a written communication from the donee organization for this purpose.<a href="#_ftn3" name="_ftnref3">3</a> <div class="refs"> <hr align="left" size="1" width="33%"> <a href="#_ftnref1" name="_ftn1">1</a>.IRC § 170(a)(1). <a href="#_ftnref2" name="_ftn2">2</a>.IRC § 170(f)(17), as added by PPA 2006. <a href="#_ftnref3" name="_ftn3">3</a>.Notice 2006-110, 2006-51 IRB 1127. </div></div>

March 13, 2024

8103 / Is a charitable remainder annuity trust or unitrust subject to income tax?

<div class="Section1">Ordinarily, the trust is not taxed on its income.<a href="#_ftn1" name="_ftnref1">1</a> Under prior law, the trust lost its tax-exempt status for any year in which it had unrelated business taxable income (UBTI). The old rule caused the loss of the CRT’s exemption for even one dollar of UBTI. TRHCA 2006 modified the excise tax on unrelated business taxable income of charitable remainder trusts and changed the loss-of-exemption rule. The current law imposes a 100 percent excise tax, but leaves the CRT’s exempt status intact.<a href="#_ftn2" name="_ftnref2">2</a> The excise tax is allocated to corpus and does not reduce the taxable income of the trust.<a href="#_ftn3" name="_ftnref3">3</a> See Q <a href="javascript:void(0)" class="accordion-cross-reference" id="8100">8100</a> regarding how distributions from a charitable remainder trust are taxed to a beneficiary.<div class="refs"> <hr align="left" size="1" width="33%"> <a href="#_ftnref1" name="_ftn1">1</a>. IRC § 664(c)(1). <a href="#_ftnref2" name="_ftn2">2</a>. IRC § 664(c), as amended by TRHCA 2006. <a href="#_ftnref3" name="_ftn3">3</a>. Treas. Reg. § 1.664-1. </div></div>

March 13, 2024

8082 / What are the tax consequences when an individual transfers stock to a charitable remainder trust?

<div class="Section1">The Service has privately ruled that a taxpayer would not recognize gain or loss as a result of transferring stock from a qualified plan to a charitable remainder unitrust upon his separation from service. Furthermore, the taxpayer would receive an income tax charitable deduction, subject to the income percentage limits, for the contribution of the stock to the CRUT in an amount equal to the fair market value of the stock at the time of the transfer less the value of the taxpayer’s remainder unitrust interest.<a href="#_ftn1" name="_ftnref1">1</a><div class="refs"> <hr align="left" size="1" width="33%"> <a href="#_ftnref1" name="_ftn1">1</a>.See Let. Ruls. 200215032, 200202078, 200038050, 199919039. </div></div>

March 13, 2024

8086 / What filing requirements apply to charitable remainder trusts?

<div class="Section1">Split-interest charitable trusts are required to file the form required by the Secretary of the Treasury each year. Historically this has been Form 1041-A, Trust Accumulation of Charitable Amounts. PPA 2006 eliminates the current exception that exempted such trusts from filing the form if all of the net income of the trust was distributed currently. The exception continues to apply to non-charitable trusts that must file Form 1041-A as a result of claiming a deduction under IRC Section 642(c).<a href="#_ftn1" name="_ftnref1">1</a> <hr> Planning Point: This change impacts charitable remainder trusts, charitable lead trusts, and pooled income funds. It remains to be seen whether Treasury will create a new form for split-interest charitable trusts or continue to use Form 1041-A. <hr> In addition, the penalty for failure to file the form (required by IRC Section 6034(a)) is $10 for each day the form is late. The maximum penalty that may be imposed is $5,000. However, for certain large trusts with gross income in excess of $250,000, the penalty is $100 per day up to a maximum of $50,000.<a href="#_ftn2" name="_ftnref2">2</a> Form 1041-A is subject to public inspection. However, information regarding the noncharitable beneficiaries of charitable split-interest trusts is not subject to public inspection.<a href="#_ftn3" name="_ftnref3">3</a> <div class="refs"> <hr align="left" size="1" width="33%"> <a href="#_ftnref1" name="_ftn1">1</a>.IRC § 6034, as amended by PPA 2006. <a href="#_ftnref2" name="_ftn2">2</a>.IRC § 6652(c)(2)(C), as amended by PPA 2006. <a href="#_ftnref3" name="_ftn3">3</a>.IRC § 6104(b), as amended by PPA 2006. </div></div>

March 13, 2024

8096 / How are unmarketable assets in a charitable remainder trust treated? Is an appraisal required?

<div class="Section1">The regulations provide that if the only trustee is the grantor, a noncharitable beneficiary, or a related or subordinate party to the grantor or the noncharitable beneficiary, a CRUT’s “unmarketable assets” (defined in Q <a href="javascript:void(0)" class="accordion-cross-reference" id="8093">8093</a>) must be valued by either an “independent trustee” or by a “qualified appraisal” from a ”qualified appraiser.”<a href="#_ftn1" name="_ftnref1">1</a> An “independent” trustee” is a person who is not the grantor, the grantor’s spouse, a noncharitable beneficiary, or a party who is related or subordinate to the grantor, the grantor’s spouse, or the noncharitable beneficiary. However, a co-trustee who is an “independent” trustee may value the trust’s unmarketable assets.<a href="#_ftn2" name="_ftnref2">2</a> For an explanation of the application of the Chapter 14 special valuation rules to CRUTs, see Q <a href="javascript:void(0)" class="accordion-cross-reference" id="938">938</a>.<div class="Section1"> The Service has ruled that a CRUT was not disqualified even though the grantors were also the sole trustees because the trust instrument provided that the trust could only accept, invest in, and hold assets with an objectively ascertainable market value.<a href="#_ftn3" name="_ftnref3">3</a> </div><div class="refs"> <hr align="left" size="1" width="33%"> <a href="#_ftnref1" name="_ftn1">1</a>.Treas. Reg. § 1.664-1(a)(7). <a href="#_ftnref2" name="_ftn2">2</a>.Treas. Reg. § 1.664-1(a)(7). <a href="#_ftnref3" name="_ftn3">3</a>.Let. Rul. 200029031. </div></div>

March 13, 2024

8063 / What verification is required to substantiate a deduction for a charitable contribution of $500,000 or more?

<div class="Section1">For property contributions for which a deduction of more than $500,000 is claimed, the individual, partnership, or corporation must attach the qualified appraisal of the property to the tax return for the taxable year.<a href="#_ftn1" name="_ftnref1">1</a><div class="refs"> <hr align="left" size="1" width="33%"> <a href="#_ftnref1" name="_ftn1">1</a>.IRC §§ 170(f)(11)(D), 170(f)(11)(E). </div></div>

March 13, 2024

8069 / What penalty applies if a taxpayer overvalues property donated to charity?

<div class="Section1"> If a taxpayer underpays his tax because of a substantial valuation misstatement of property donated to charity, he may be subject to a penalty of 20 percent of the underpayment attributable to the misstatement.<a href="#_ftn1" name="_ftnref1">1</a> However, this penalty applies only if the underpayment attributable to the misstatement exceeds $5,000 ($10,000 for a corporation other than an S corporation or a personal holding company).<a href="#_ftn2" name="_ftnref2">2</a> A “substantial valuation misstatement” exists if the value claimed is 150 percent or more of the amount determined to be correct.<a href="#_ftn3" name="_ftnref3">3</a> If the value claimed is 200 percent or more of the amount determined to be correct, there is a “gross valuation misstatement,” which is subject to a 40 percent underpayment penalty.<a href="#_ftn4" name="_ftnref4">4</a><div class="Section1"> For guidance on the circumstances under which the disclosure on a taxpayer’s return with respect to an item or a position is adequate for the purpose of reducing the understatement of income tax under IRC Section 6662(d), see Revenue Procedure 2005-75.<a href="#_ftn5" name="_ftnref5">5</a> </div><div class="refs"> <hr align="left" size="1" width="33%"> <a href="#_ftnref1" name="_ftn1">1</a>.IRC §§ 6662(a), 6662(b)(3). <a href="#_ftnref2" name="_ftn2">2</a>.See IRC § 6662(d). <a href="#_ftnref3" name="_ftn3">3</a>.IRC § 6662(e)(1)(A), as amended by PPA 2006. <a href="#_ftnref4" name="_ftn4">4</a>.IRC § 6662(h)(2)(A)(i), as amended by PPA 2006. <a href="#_ftnref5" name="_ftn5">5</a>.2005-50 IRB 1137. </div></div>