ACQNET: An IMPORTANT correction regarding large gifts and the new income tax regulations

Date: Mon, 05 Feb 2007 08:27:02 -0800
From: Frank Carothers (UC-Berkeley) <fcarothe_at_library.berkeley.edu>
Subject: A correction regarding large gifts and the new income tax 
regulations

[ED. NOTE: We will be making a special x-ref in the ACQNET Archives from 
the
October 2006 posting to this one, due to the important legal 
ramifications of this interpretation.
This is a first for ACQNET and we do NOT plan to make a habit of doing 
this. Be aware that
when you post information, you bear the responsibility for the accuracy 
of the information you
provide. Please see the editorial policy for more details on this.]

Dear Colleagues,

Some of you may recall my post of October 2006 in which I wrote of 
changes to income tax regulations
and their effects on large gifts-in-kind.

At the time the revised IRS /Instructions for Form 8283/ had not yet 
appeared, and I submitted
my post in the interest of discussing significant regulatory changes 
that had already taken effect.
I wrote:

    "the amendments will have a significant impact both on libraries and
    on donors in the case of large gifts.
    ... /The new regulations require that a donee organization report
    sale or disposal of any part of a
    /
    /large gift if sale or disposal occurs within three years of the
    date of the gift/." (emphasis added) 

and

    "[The amendments] will ... have a significant impact on large gifts
    made to libraries. We are faced with
    a record-keeping requirement that we cannot possibly meet, and the
    prospect of reducing the deductions
    claimed by our donors." 

While the relevant portions of federal tax code appear to support these 
observations, the newly revised IRS
/Instructions for Form 8283/ clearly do not. The new instructions, which 
appeared at the end of 2006, directly
contradict my statement regarding sale or disposal of any part of a 
large gift, and thus do not appear to create the
problems that I anticipated. Like previous versions of the instructions, 
the 2006 revision explicitly permits sale or
other disposal of those parts of large gifts that are individually 
appraised at $500 or less, provided that those items
have been identified in Section B, Part II, of the donor's Form 8283 The 
instructions
http://www.irs.gov/pub/irs-pdf/i8283.pdf read in part:

    “*Part II, Taxpayer (Donor) Statement* 
    “Complete Section B, Part II, for each item included in Section B,
    Part I, that has an appraised value of $500 or less. ??
    Then, the donee does not have to file Form 8282, Donee Information
    Return, for items valued at $500 or less." (p.5) 

The instructions for Part II conclude with an example outlining the 
proper procedure for claiming a deduction for an item that is part
of a gift valued for tax purposes at more than $5000 and that is itself 
valued at $500 or less, while enabling the donee to sell the item
before the expiration of three years from the date of the gift without 
reporting it on Form 8282.

My statements were incorrect, and I truly regret the inconvenience they 
may have caused. Please do not hesitate to contact me
if you would like to discuss this matter further.

Frank Carothers
UC-Berkeley


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