Tax Wise Donation of Tangible Personal Property

[Deleted]

Hello All,

We've relocated back to the U.S. and surprise, surprise between the sea shipment and our stuff in storage not everything fits!

We've been carting around for some 20+ years a number of family personal property items which are probably quite valuable as DH's great uncle was a very famous WWII general. Although I think each item could fetch several thousand dollars at auction, we think the right thing to do is to donate them to a couple of museums which are dedicated to the General. We already have some interest from one but haven't yet contacted the other.

I know I need to get written appraisals for these items if they are worth more than 5k but it's not clear to me about what charitable limits might apply. I did read through publication 526 and could use some help.

My best guess is that these 9 items could be worth around $100k if they went to auction.

Many thanks for your help,
Bonny

[mwcpa]

besides needing an appraisal for the items as noted...

in general, contributions that are deductible are limited to 50% of AGI with any "excess" amount carried to the next year.

Example.
My AGI is 100K
I contributed 75K to a qualified charity
My deduction is limited to 50K
the excess amount of 25K is carried to next year and available at that time.

[Deleted]

Thanks MWCPA!

Sounds like we should jump on this donation while we still have the high income because in 2013 we'll be dropping down to our retirement income. With our real estate write-offs I doubt we'll be paying much in the way of taxes for the next few years.

Follow up question; we plan on selling one of the rental properties in 5 years and should have a substantial capital gain. The capital gain would be included in our AGI, correct? And therefore it could make sense (assuming the rules don't change too much) to do another round of charitable donations at that point to reduce the taxes owed, correct?

[mwcpa]

under the current law, net capital gains are part of the computation of AGI.

but, one of the tax reform proposals being floated would be the elimination or reduction of deductions, including charitable gifts. Mr. Romney has stated he would reduced unspecified deduction so his across the board tax rate cuts would be revenue neutral. There has also been other suggestions from the Obama camp to reduce the amount of charity from the "wealthy."

Given the flux, one may want to keep their ear to DC to see what Congress may do, other than what they are doing now, which is nothing.

[Deleted]

Got it.

Thank you!

[Deleted]

It sounds like this property might be considered "capital gain property" under IRS rules and as such the deductable amount would be limited to 30% of AGI, not 50%. Do you agree MWCPA?

[mwcpa]

there are special rules related to certain appreciated property and changing the 50% AGI limit to 30%, this issue is raised in IRC 170(b)(1)(C), so PW you bring up a valid point.... often though people who give away personal property are not giving away appreciated property and the rule would not apply.

Here's an example...

During the I gave a church (a 50% charity) land with a FMV of $30,000, my basis is $22,000. The land was held for investment for more than 12 months so it is capital gain property. The donation of the land is subject to the special 30% AGI limitation.

[mmhmm]

Thanks, so much, for being here when people have questions about taxes, mwcpa. I know so many have really appreciated the help and advice you've offered!