New Rules On Donations Of Personal Property Kick In September 2

If you donate appreciated long-term capital gain property to charity, you can deduct the fair-market value of the property, even if you paid a lot less. If the donation is of an item other than publicly-traded stock or securites, the tax law requires you to support the donation with a "qualified appraisal."

The recently enacted pension bill (H.R. 4) adds new restrictions for donations of tangible personal property, like art. If the property is sold in the year it is donated, the charitable deduction will be limited to the cost basis. If the property is sold within three years of the contribution, the donor will have to recapture as income the amount the charitable deduciton exceeded basis. This takes effect for donations after September 1, 2006.

Be careful with any restrictions on the sale that you might impose as a condition of the gift; the IRS could say that the restriction reduces the value of the property, therefore also reducing your charitable deduction.

Roth & Company CPAs