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2006 Tax Software

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2006 Tax Software

2006 tax software Publication 561 - Main Contents Table of Contents What Is Fair Market Value (FMV)?Factors. 2006 tax software Stock. 2006 tax software Options. 2006 tax software Determining Fair Market Value Problems in Determining Fair Market Value Valuation of Various Kinds of PropertyHousehold Goods Used Clothing Jewelry and Gems Paintings, Antiques, and Other Objects of Art Collections Cars, Boats, and Aircraft Inventory Patents Stocks and Bonds Real Estate Interest in a Business Annuities, Interests for Life or Terms of Years, Remainders, and Reversions Certain Life Insurance and Annuity Contracts Partial Interest in Property Not in Trust AppraisalsDeductions of More Than $5,000 Deductions of More Than $500,000 Qualified Appraisal Form 8283 Internal Revenue Service Review of Appraisals Penalty How To Get Tax HelpLow income tax clinics (LITCs). 2006 tax software What Is Fair Market Value (FMV)? To figure how much you may deduct for property that you contribute, you must first determine its fair market value on the date of the contribution. 2006 tax software Fair market value. 2006 tax software   Fair market value (FMV) is the price that property would sell for on the open market. 2006 tax software It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. 2006 tax software If you put a restriction on the use of property you donate, the FMV must reflect that restriction. 2006 tax software Example 1. 2006 tax software If you give used clothing to the Salvation Army, the FMV would be the price that typical buyers actually pay for clothing of this age, condition, style, and use. 2006 tax software Usually, such items are worth far less than what you paid for them. 2006 tax software Example 2. 2006 tax software If you donate land and restrict its use to agricultural purposes, you must value the land at its value for agricultural purposes, even though it would have a higher FMV if it were not restricted. 2006 tax software Factors. 2006 tax software   In making and supporting the valuation of property, all factors affecting value are relevant and must be considered. 2006 tax software These include: The cost or selling price of the item, Sales of comparable properties, Replacement cost, and Opinions of experts. 2006 tax software   These factors are discussed later. 2006 tax software Also, see Table 1 for a summary of questions to ask as you consider each factor. 2006 tax software Date of contribution. 2006 tax software   Ordinarily, the date of a contribution is the date that the transfer of the property takes place. 2006 tax software Stock. 2006 tax software   If you deliver, without any conditions, a properly endorsed stock certificate to a qualified organization or to an agent of the organization, the date of the contribution is the date of delivery. 2006 tax software If the certificate is mailed and received through the regular mail, it is the date of mailing. 2006 tax software If you deliver the certificate to a bank or broker acting as your agent or to the issuing corporation or its agent, for transfer into the name of the organization, the date of the contribution is the date the stock is transferred on the books of the corporation. 2006 tax software Options. 2006 tax software   If you grant an option to a qualified organization to buy real property, you have not made a charitable contribution until the organization exercises the option. 2006 tax software The amount of the contribution is the FMV of the property on the date the option is exercised minus the exercise price. 2006 tax software Example. 2006 tax software You grant an option to a local university, which is a qualified organization, to buy real property. 2006 tax software Under the option, the university could buy the property at any time during a 2-year period for $40,000. 2006 tax software The FMV of the property on the date the option is granted is $50,000. 2006 tax software In the following tax year, the university exercises the option. 2006 tax software The FMV of the property on the date the option is exercised is $55,000. 2006 tax software Therefore, you have made a charitable contribution of $15,000 ($55,000, the FMV, minus $40,000, the exercise price) in the tax year the option is exercised. 2006 tax software Determining Fair Market Value Determining the value of donated property would be a simple matter if you could rely only on fixed formulas, rules, or methods. 2006 tax software Usually it is not that simple. 2006 tax software Using such formulas, etc. 2006 tax software , seldom results in an acceptable determination of FMV. 2006 tax software There is no single formula that always applies when determining the value of property. 2006 tax software This is not to say that a valuation is only guesswork. 2006 tax software You must consider all the facts and circumstances connected with the property, such as its desirability, use, and scarcity. 2006 tax software For example, donated furniture should not be evaluated at some fixed rate such as 15% of the cost of new replacement furniture. 2006 tax software When the furniture is contributed, it may be out of style or in poor condition, therefore having little or no market value. 2006 tax software On the other hand, it may be an antique, the value of which could not be determined by using any formula. 2006 tax software Cost or Selling Price of the Donated Property The cost of the property to you or the actual selling price received by the qualified organization may be the best indication of its FMV. 2006 tax software However, because conditions in the market change, the cost or selling price of property may have less weight if the property was not bought or sold reasonably close to the date of contribution. 2006 tax software The cost or selling price is a good indication of the property's value if: The purchase or sale took place close to the valuation date in an open market, The purchase or sale was at “arm's-length,” The buyer and seller knew all relevant facts, The buyer and seller did not have to act, and The market did not change between the date of purchase or sale and the valuation date. 2006 tax software Example. 2006 tax software Tom Morgan, who is not a dealer in gems, bought an assortment of gems for $5,000 from a promoter. 2006 tax software The promoter claimed that the price was “wholesale” even though he and other dealers made similar sales at similar prices to other persons who were not dealers. 2006 tax software The promoter said that if Tom kept the gems for more than 1 year and then gave them to charity, Tom could claim a charitable deduction of $15,000, which, according to the promoter, would be the value of the gems at the time of contribution. 2006 tax software Tom gave the gems to a qualified charity 13 months after buying them. 2006 tax software The selling price for these gems had not changed from the date of purchase to the date he donated them to charity. 2006 tax software The best evidence of FMV depends on actual transactions and not on some artificial estimate. 2006 tax software The $5,000 charged Tom and others is, therefore, the best evidence of the maximum FMV of the gems. 2006 tax software Terms of the purchase or sale. 2006 tax software   The terms of the purchase or sale should be considered in determining FMV if they influenced the price. 2006 tax software These terms include any restrictions, understandings, or covenants limiting the use or disposition of the property. 2006 tax software Rate of increase or decrease in value. 2006 tax software   Unless you can show that there were unusual circumstances, it is assumed that the increase or decrease in the value of your donated property from your cost has been at a reasonable rate. 2006 tax software For time adjustments, an appraiser may consider published price indexes for information on general price trends, building costs, commodity costs, securities, and works of art sold at auction in arm's-length sales. 2006 tax software Example. 2006 tax software Bill Brown bought a painting for $10,000. 2006 tax software Thirteen months later he gave it to an art museum, claiming a charitable deduction of $15,000 on his tax return. 2006 tax software The appraisal of the painting should include information showing that there were unusual circumstances that justify a 50% increase in value for the 13 months Bill held the property. 2006 tax software Arm's-length offer. 2006 tax software   An arm's-length offer to buy the property close to the valuation date may help to prove its value if the person making the offer was willing and able to complete the transaction. 2006 tax software To rely on an offer, you should be able to show proof of the offer and the specific amount to be paid. 2006 tax software Offers to buy property other than the donated item will help to determine value if the other property is reasonably similar to the donated property. 2006 tax software Sales of Comparable Properties The sales prices of properties similar to the donated property are often important in determining the FMV. 2006 tax software The weight to be given to each sale depends on the following. 2006 tax software The degree of similarity between the property sold and the donated property. 2006 tax software The time of the sale—whether it was close to the valuation date. 2006 tax software The circumstances of the sale—whether it was at arm's-length with a knowledgeable buyer and seller, with neither having to act. 2006 tax software The conditions of the market in which the sale was made—whether unusually inflated or deflated. 2006 tax software The comparable sales method of valuing real estate is explained later under Valuation of Various Kinds of Property. 2006 tax software Example 1. 2006 tax software Mary Black, who is not a book dealer, paid a promoter $10,000 for 500 copies of a single edition of a modern translation of the Bible. 2006 tax software The promoter had claimed that the price was considerably less than the “retail” price, and gave her a statement that the books had a total retail value of $30,000. 2006 tax software The promoter advised her that if she kept the Bibles for more than 1 year and then gave them to a qualified organization, she could claim a charitable deduction for the “retail” price of $30,000. 2006 tax software Thirteen months later she gave all the Bibles to a church that she selected from a list provided by the promoter. 2006 tax software At the time of her donation, wholesale dealers were selling similar quantities of Bibles to the general public for $10,000. 2006 tax software The FMV of the Bibles is $10,000, the price at which similar quantities of Bibles were being sold to others at the time of the contribution. 2006 tax software Example 2. 2006 tax software The facts are the same as in Example 1, except that the promoter gave Mary Black a second option. 2006 tax software The promoter said that if Mary wanted a charitable deduction within 1 year of the purchase, she could buy the 500 Bibles at the “retail” price of $30,000, paying only $10,000 in cash and giving a promissory note for the remaining $20,000. 2006 tax software The principal and interest on the note would not be due for 12 years. 2006 tax software According to the promoter, Mary could then, within 1 year of the purchase, give the Bibles to a qualified organization and claim the full $30,000 retail price as a charitable contribution. 2006 tax software She purchased the Bibles under the second option and, 3 months later, gave them to a church, which will use the books for church purposes. 2006 tax software At the time of the gift, the promoter was selling similar lots of Bibles for either $10,000 or $30,000. 2006 tax software The difference between the two prices was solely at the discretion of the buyer. 2006 tax software The promoter was a willing seller for $10,000. 2006 tax software Therefore, the value of Mary's contribution of the Bibles is $10,000, the amount at which similar lots of Bibles could be purchased from the promoter by members of the general public. 2006 tax software Replacement Cost The cost of buying, building, or manufacturing property similar to the donated item should be considered in determining FMV. 2006 tax software However, there must be a reasonable relationship between the replacement cost and the FMV. 2006 tax software The replacement cost is the amount it would cost to replace the donated item on the valuation date. 2006 tax software Often there is no relationship between the replacement cost and the FMV. 2006 tax software If the supply of the donated property is more or less than the demand for it, the replacement cost becomes less important. 2006 tax software To determine the replacement cost of the donated property, find the “estimated replacement cost new. 2006 tax software ” Then subtract from this figure an amount for depreciation due to the physical condition and obsolescence of the donated property. 2006 tax software You should be able to show the relationship between the depreciated replacement cost and the FMV, as well as how you arrived at the “estimated replacement cost new. 2006 tax software ” Opinions of Experts Generally, the weight given to an expert's opinion on matters such as the authenticity of a coin or a work of art, or the most profitable and best use of a piece of real estate, depends on the knowledge and competence of the expert and the thoroughness with which the opinion is supported by experience and facts. 2006 tax software For an expert's opinion to deserve much weight, the facts must support the opinion. 2006 tax software For additional information, see Appraisals, later. 2006 tax software Table 1. 2006 tax software Factors That Affect FMV IF the factor you are considering is. 2006 tax software . 2006 tax software . 2006 tax software THEN you should ask these questions. 2006 tax software . 2006 tax software . 2006 tax software     cost or selling price Was the purchase or sale of the property reasonably close to the date of contribution? Was any increase or decrease in value, as compared to your cost, at a reasonable rate? Do the terms of purchase or sale limit what can be done with the property? Was there an arm's-length offer to buy the property close to the valuation date?     sales of comparable properties How similar is the property sold to the property donated? How close is the date of sale to the valuation date? Was the sale at arm's-length? What was the condition of the market at the time of sale?     replacement cost What would it cost to replace the donated property? Is there a reasonable relationship between replacement cost and FMV? Is the supply of the donated property more or less than the demand for it?     opinions of experts Is the expert knowledgeable and competent? Is the opinion thorough and supported by facts and experience? Problems in Determining Fair Market Value There are a number of problems in determining the FMV of donated property. 2006 tax software Unusual Market Conditions The sale price of the property itself in an arm's-length transaction in an open market is often the best evidence of its value. 2006 tax software When you rely on sales of comparable property, the sales must have been made in an open market. 2006 tax software If those sales were made in a market that was artificially supported or stimulated so as not to be truly representative, the prices at which the sales were made will not indicate the FMV. 2006 tax software For example, liquidation sale prices usually do not indicate the FMV. 2006 tax software Also, sales of stock under unusual circumstances, such as sales of small lots, forced sales, and sales in a restricted market, may not represent the FMV. 2006 tax software Selection of Comparable Sales Using sales of comparable property is an important method for determining the FMV of donated property. 2006 tax software However, the amount of weight given to a sale depends on the degree of similarity between the comparable and the donated properties. 2006 tax software The degree of similarity must be close enough so that this selling price would have been given consideration by reasonably well-informed buyers or sellers of the property. 2006 tax software Example. 2006 tax software You give a rare, old book to your former college. 2006 tax software The book is a third edition and is in poor condition because of a missing back cover. 2006 tax software You discover that there was a sale for $300, near the valuation date, of a first edition of the book that was in good condition. 2006 tax software Although the contents are the same, the books are not at all similar because of the different editions and their physical condition. 2006 tax software Little consideration would be given to the selling price of the $300 property by knowledgeable buyers or sellers. 2006 tax software Future Events You may not consider unexpected events happening after your donation of property in making the valuation. 2006 tax software You may consider only the facts known at the time of the gift, and those that could be reasonably expected at the time of the gift. 2006 tax software Example. 2006 tax software You give farmland to a qualified charity. 2006 tax software The transfer provides that your mother will have the right to all income and full use of the property for her life. 2006 tax software Even though your mother dies 1 week after the transfer, the value of the property on the date it is given is its present value, subject to the life interest as estimated from actuarial tables. 2006 tax software You may not take a higher deduction because the charity received full use and possession of the land only 1 week after the transfer. 2006 tax software Using Past Events to Predict the Future A common error is to rely too much on past events that do not fairly reflect the probable future earnings and FMV. 2006 tax software Example. 2006 tax software You give all your rights in a successful patent to your favorite charity. 2006 tax software Your records show that before the valuation date there were three stages in the patent's history of earnings. 2006 tax software First, there was rapid growth in earnings when the invention was introduced. 2006 tax software Then, there was a period of high earnings when the invention was being exploited. 2006 tax software Finally, there was a decline in earnings when competing inventions were introduced. 2006 tax software The entire history of earnings may be relevant in estimating the future earnings. 2006 tax software However, the appraiser must not rely too much on the stage of rapid growth in earnings, or of high earnings. 2006 tax software The market conditions at those times do not represent the condition of the market at the valuation date. 2006 tax software What is most significant is the trend of decline in earnings up to the valuation date. 2006 tax software For more information about donations of patents, see Patents, later. 2006 tax software Valuation of Various Kinds of Property This section contains information on determining the FMV of ordinary kinds of donated property. 2006 tax software For information on appraisals, see Appraisals, later. 2006 tax software Household Goods The FMV of used household goods, such as furniture, appliances, and linens, is usually much lower than the price paid when new. 2006 tax software Such used property may have little or no market value because of its worn condition. 2006 tax software It may be out of style or no longer useful. 2006 tax software You cannot take a deduction for household goods donated after August 17, 2006, unless they are in good used condition or better. 2006 tax software A household good that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. 2006 tax software See Deduction over $500 for certain clothing or household items, later. 2006 tax software If the property is valuable because it is old or unique, see the discussion under Paintings, Antiques, and Other Objects of Art. 2006 tax software Used Clothing Used clothing and other personal items are usually worth far less than the price you paid for them. 2006 tax software Valuation of items of clothing does not lend itself to fixed formulas or methods. 2006 tax software The price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops, is an indication of the value. 2006 tax software You cannot take a deduction for clothing donated after August 17, 2006, unless it is in good used condition or better. 2006 tax software An item of clothing that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. 2006 tax software See Deduction over $500 for certain clothing or household items, later. 2006 tax software For valuable furs or very expensive gowns, a Form 8283 may have to be sent with your tax return. 2006 tax software Jewelry and Gems Jewelry and gems are of such a specialized nature that it is almost always necessary to get an appraisal by a specialized jewelry appraiser. 2006 tax software The appraisal should describe, among other things, the style of the jewelry, the cut and setting of the gem, and whether it is now in fashion. 2006 tax software If not in fashion, the possibility of having the property redesigned, recut, or reset should be reported in the appraisal. 2006 tax software The stone's coloring, weight, cut, brilliance, and flaws should be reported and analyzed. 2006 tax software Sentimental personal value has no effect on FMV. 2006 tax software But if the jewelry was owned by a famous person, its value might increase. 2006 tax software Paintings, Antiques, and Other Objects of Art Your deduction for contributions of paintings, antiques, and other objects of art, should be supported by a written appraisal from a qualified and reputable source, unless the deduction is $5,000 or less. 2006 tax software Examples of information that should be included in appraisals of art objects—paintings in particular—are found later under Qualified Appraisal. 2006 tax software Art valued at $20,000 or more. 2006 tax software   If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the signed appraisal to your return. 2006 tax software For individual objects valued at $20,000 or more, a photograph of a size and quality fully showing the object, preferably an 8 x 10 inch color photograph or a color transparency no smaller than 4 x 5 inches, must be provided upon request. 2006 tax software Art valued at $50,000 or more. 2006 tax software   If you donate an item of art that has been appraised at $50,000 or more, you can request a Statement of Value for that item from the IRS. 2006 tax software You must request the statement before filing the tax return that reports the donation. 2006 tax software Your request must include the following. 2006 tax software A copy of a qualified appraisal of the item. 2006 tax software See Qualified Appraisal, later. 2006 tax software A $2,500 check or money order payable to the Internal Revenue Service for the user fee that applies to your request regarding one, two, or three items of art. 2006 tax software Add $250 for each item in excess of three. 2006 tax software A completed Form 8283, Section B. 2006 tax software The location of the IRS territory that has examination responsibility for your return. 2006 tax software If your request lacks essential information, you will be notified and given 30 days to provide the missing information. 2006 tax software   Send your request to: Internal Revenue Service Attention: Art Appraisal (C:AP:ART) P. 2006 tax software O. 2006 tax software Box 27720 McPherson Station Washington, DC 20038 Refunds. 2006 tax software   You can withdraw your request for a Statement of Value at any time before it is issued. 2006 tax software However, the IRS will not refund the user fee if you do. 2006 tax software   If the IRS declines to issue a Statement of Value in the interest of efficient tax administration, the IRS will refund the user fee. 2006 tax software Authenticity. 2006 tax software   The authenticity of the donated art must be determined by the appraiser. 2006 tax software Physical condition. 2006 tax software   Important items in the valuation of antiques and art are physical condition and extent of restoration. 2006 tax software These have a significant effect on the value and must be fully reported in an appraisal. 2006 tax software An antique in damaged condition, or lacking the “original brasses,” may be worth much less than a similar piece in excellent condition. 2006 tax software Art appraisers. 2006 tax software   More weight will usually be given to an appraisal prepared by an individual specializing in the kind and price range of the art being appraised. 2006 tax software Certain art dealers or appraisers specialize, for example, in old masters, modern art, bronze sculpture, etc. 2006 tax software Their opinions on the authenticity and desirability of such art would usually be given more weight than the opinions of more generalized art dealers or appraisers. 2006 tax software They can report more recent comparable sales to support their opinion. 2006 tax software   To identify and locate experts on unique, specialized items or collections, you may wish to use the current Official Museum Directory of the American Association of Museums. 2006 tax software It lists museums both by state and by category. 2006 tax software   To help you locate a qualified appraiser for your donation, you may wish to ask an art historian at a nearby college or the director or curator of a local museum. 2006 tax software The Yellow Pages often list specialized art and antique dealers, auctioneers, and art appraisers. 2006 tax software You may be able to find a qualified appraiser on the Internet. 2006 tax software You may also contact associations of dealers for guidance. 2006 tax software Collections Since many kinds of hobby collections may be the subject of a charitable donation, it is not possible to discuss all of the possible collectibles in this publication. 2006 tax software Most common are rare books, autographs, sports memorabilia, dolls, manuscripts, stamps, coins, guns, phonograph records, and natural history items. 2006 tax software Many of the elements of valuation that apply to paintings and other objects of art, discussed earlier, also apply to miscellaneous collections. 2006 tax software Reference material. 2006 tax software   Publications available to help you determine the value of many kinds of collections include catalogs, dealers' price lists, and specialized hobby periodicals. 2006 tax software When using one of these price guides, you must use the current edition at the date of contribution. 2006 tax software However, these sources are not always reliable indicators of FMV and should be supported by other evidence. 2006 tax software   For example, a dealer may sell an item for much less than is shown on a price list, particularly after the item has remained unsold for a long time. 2006 tax software The price an item sold for in an auction may have been the result of a rigged sale or a mere bidding duel. 2006 tax software The appraiser must analyze the reference material, and recognize and make adjustments for misleading entries. 2006 tax software If you are donating a valuable collection, you should get an appraisal. 2006 tax software If your donation appears to be of little value, you may be able to make a satisfactory valuation using reference materials available at a state, city, college, or museum library. 2006 tax software Stamp collections. 2006 tax software   Most libraries have catalogs or other books that report the publisher's estimate of values. 2006 tax software Generally, two price levels are shown for each stamp: the price postmarked and the price not postmarked. 2006 tax software Stamp dealers generally know the value of their merchandise and are able to prepare satisfactory appraisals of valuable collections. 2006 tax software Coin collections. 2006 tax software   Many catalogs and other reference materials show the writer's or publisher's opinion of the value of coins on or near the date of the publication. 2006 tax software Like many other collectors' items, the value of a coin depends on the demand for it, its age, and its rarity. 2006 tax software Another important factor is the coin's condition. 2006 tax software For example, there is a great difference in the value of a coin that is in mint condition and a similar coin that is only in good condition. 2006 tax software   Catalogs usually establish a category for coins, based on their physical condition—mint or uncirculated, extremely fine, very fine, fine, very good, good, fair, or poor—with a different valuation for each category. 2006 tax software Books. 2006 tax software   The value of books is usually determined by selecting comparable sales and adjusting the prices according to the differences between the comparable sales and the item being evaluated. 2006 tax software This is difficult to do and, except for a collection of little value, should be done by a specialized appraiser. 2006 tax software Within the general category of literary property, there are dealers who specialize in certain areas, such as Americana, foreign imports, Bibles, and scientific books. 2006 tax software Modest value of collection. 2006 tax software   If the collection you are donating is of modest value, not requiring a written appraisal, the following information may help you in determining the FMV. 2006 tax software   A book that is very old, or very rare, is not necessarily valuable. 2006 tax software There are many books that are very old or rare, but that have little or no market value. 2006 tax software Condition of book. 2006 tax software   The condition of a book may have a great influence on its value. 2006 tax software Collectors are interested in items that are in fine, or at least good, condition. 2006 tax software When a book has a missing page, a loose binding, tears, stains, or is otherwise in poor condition, its value is greatly lowered. 2006 tax software Other factors. 2006 tax software   Some other factors in the valuation of a book are the kind of binding (leather, cloth, paper), page edges, and illustrations (drawings and photographs). 2006 tax software Collectors usually want first editions of books. 2006 tax software However, because of changes or additions, other editions are sometimes worth as much as, or more than, the first edition. 2006 tax software Manuscripts, autographs, diaries, and similar items. 2006 tax software   When these items are handwritten, or at least signed by famous people, they are often in demand and are valuable. 2006 tax software The writings of unknowns also may be of value if they are of unusual historical or literary importance. 2006 tax software Determining the value of such material is difficult. 2006 tax software For example, there may be a great difference in value between two diaries that were kept by a famous person—one kept during childhood and the other during a later period in his or her life. 2006 tax software The appraiser determines a value in these cases by applying knowledge and judgment to such factors as comparable sales and conditions. 2006 tax software Signatures. 2006 tax software   Signatures, or sets of signatures, that were cut from letters or other papers usually have little or no value. 2006 tax software But complete sets of the signatures of U. 2006 tax software S. 2006 tax software presidents are in demand. 2006 tax software Cars, Boats, and Aircraft If you donate a car, a boat, or an aircraft to a charitable organization, its FMV must be determined. 2006 tax software Certain commercial firms and trade organizations publish monthly or seasonal guides for different regions of the country, containing complete dealer sale prices or dealer average prices for recent model years. 2006 tax software Prices are reported for each make, model, and year. 2006 tax software These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. 2006 tax software The prices are not “official,” and these publications are not considered an appraisal of any specific donated property. 2006 tax software But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. 2006 tax software These publications are sometimes available from public libraries or at a bank, credit union, or finance company. 2006 tax software You can also find pricing information about used cars on the Internet. 2006 tax software An acceptable measure of the FMV of a donated car, boat, or airplane is an amount not in excess of the price listed in a used vehicle pricing guide for a private party sale, not the dealer retail value, of a similar vehicle. 2006 tax software However, the FMV may be less than that amount if the vehicle has engine trouble, body damage, high mileage, or any type of excessive wear. 2006 tax software The FMV of a donated vehicle is the same as the price listed in a used vehicle pricing guide for a private party sale only if the guide lists a sales price for a vehicle that is the same make, model, and year, sold in the same area, in the same condition, with the same or similar options or accessories, and with the same or similar warranties as the donated vehicle. 2006 tax software Example. 2006 tax software You donate a used car in poor condition to a local high school for use by students studying car repair. 2006 tax software A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. 2006 tax software However, the guide shows the price for a private party sale of the car is only $750. 2006 tax software The FMV of the car is considered to be no more than $750. 2006 tax software Boats. 2006 tax software   Except for inexpensive small boats, the valuation of boats should be based on an appraisal by a marine surveyor because the physical condition is so critical to the value. 2006 tax software More information. 2006 tax software   Your deduction for a donated car, boat, or airplane generally is limited to the gross proceeds from its sale by the qualified organization. 2006 tax software This rule applies if the claimed value of the donated vehicle is more than $500. 2006 tax software In certain cases, you can deduct the vehicle's FMV. 2006 tax software For details, see Publication 526. 2006 tax software Inventory If you donate any inventory item to a charitable organization, the amount of your deductible contribution generally is the FMV of the item, minus any gain you would have realized if you had sold the item at its FMV on the date of the gift. 2006 tax software For more information, see Publication 526. 2006 tax software Patents To determine the FMV of a patent, you must take into account, among other factors: Whether the patented technology has been made obsolete by other technology; Any restrictions on the donee's use of, or ability to transfer, the patented technology; and The length of time remaining before the patent expires. 2006 tax software However, your deduction for a donation of a patent or other intellectual property is its FMV, minus any gain you would have realized if you had sold the property at its FMV on the date of the gift. 2006 tax software Generally, this means your deduction is the lesser of the property's FMV or its basis. 2006 tax software For details, see Publication 526. 2006 tax software Stocks and Bonds The value of stocks and bonds is the FMV of a share or bond on the valuation date. 2006 tax software See Date of contribution, earlier, under What Is Fair Market Value (FMV). 2006 tax software Selling prices on valuation date. 2006 tax software   If there is an active market for the contributed stocks or bonds on a stock exchange, in an over-the-counter market, or elsewhere, the FMV of each share or bond is the average price between the highest and lowest quoted selling prices on the valuation date. 2006 tax software For example, if the highest selling price for a share was $11, and the lowest $9, the average price is $10. 2006 tax software You get the average price by adding $11 and $9 and dividing the sum by 2. 2006 tax software No sales on valuation date. 2006 tax software   If there were no sales on the valuation date, but there were sales within a reasonable period before and after the valuation date, you determine FMV by taking the average price between the highest and lowest sales prices on the nearest date before and on the nearest date after the valuation date. 2006 tax software Then you weight these averages in inverse order by the respective number of trading days between the selling dates and the valuation date. 2006 tax software Example. 2006 tax software   On the day you gave stock to a qualified organization, there were no sales of the stock. 2006 tax software Sales of the stock nearest the valuation date took place two trading days before the valuation date at an average selling price of $10 and three trading days after the valuation date at an average selling price of $15. 2006 tax software The FMV on the valuation date was $12, figured as follows: [(3 x $10) + (2 x $15)] ÷ 5 = $12 Listings on more than one stock exchange. 2006 tax software   Stocks or bonds listed on more than one stock exchange are valued based on the prices of the exchange on which they are principally dealt. 2006 tax software This applies if these prices are published in a generally available listing or publication of general circulation. 2006 tax software If this is not applicable, and the stocks or bonds are reported on a composite listing of combined exchanges in a publication of general circulation, use the composite list. 2006 tax software See also Unavailable prices or closely held corporation, later. 2006 tax software Bid and asked prices on valuation date. 2006 tax software   If there were no sales within a reasonable period before and after the valuation date, the FMV is the average price between the bona fide bid and asked prices on the valuation date. 2006 tax software Example. 2006 tax software Although there were no sales of Blue Corporation stock on the valuation date, bona fide bid and asked prices were available on that date of $14 and $16, respectively. 2006 tax software The FMV is $15, the average price between the bid and asked prices. 2006 tax software No prices on valuation date. 2006 tax software   If there were no prices available on the valuation date, you determine FMV by taking the average prices between the bona fide bid and asked prices on the closest trading date before and after the valuation date. 2006 tax software Both dates must be within a reasonable period. 2006 tax software Then you weight these averages in inverse order by the respective number of trading days between the bid and asked dates and the valuation date. 2006 tax software Example. 2006 tax software On the day you gave stock to a qualified organization, no prices were available. 2006 tax software Bona fide bid and asked prices 3 days before the valuation date were $10 and 2 days after the valuation date were $15. 2006 tax software The FMV on the valuation date is $13, figured as follows: [(2 x $10) + (3 x $15)] ÷ 5 = $13 Prices only before or after valuation date, but not both. 2006 tax software   If no selling prices or bona fide bid and asked prices are available on a date within a reasonable period before the valuation date, but are available on a date within a reasonable period after the valuation date, or vice versa, then the average price between the highest and lowest of such available prices may be treated as the value. 2006 tax software Large blocks of stock. 2006 tax software   When a large block of stock is put on the market, it may lower the selling price of the stock if the supply is greater than the demand. 2006 tax software On the other hand, market forces may exist that will afford higher prices for large blocks of stock. 2006 tax software Because of the many factors to be considered, determining the value of large blocks of stock usually requires the help of experts specializing in underwriting large quantities of securities, or in trading in the securities of the industry of which the particular company is a part. 2006 tax software Unavailable prices or closely held corporation. 2006 tax software   If selling prices or bid and asked prices are not available, or if securities of a closely held corporation are involved, determine the FMV by considering the following factors. 2006 tax software For bonds, the soundness of the security, the interest yield, the date of maturity, and other relevant factors. 2006 tax software For shares of stock, the company's net worth, prospective earning power and dividend-paying capacity, and other relevant factors. 2006 tax software Other factors. 2006 tax software   Other relevant factors include: The nature and history of the business, especially its recent history, The goodwill of the business, The economic outlook in the particular industry, The company's position in the industry, its competitors, and its management, and The value of securities of corporations engaged in the same or similar business. 2006 tax software For preferred stock, the most important factors are its yield, dividend coverage, and protection of its liquidation preference. 2006 tax software   You should keep complete financial and other information on which the valuation is based. 2006 tax software This includes copies of reports of examinations of the company made by accountants, engineers, or any technical experts on or close to the valuation date. 2006 tax software Restricted securities. 2006 tax software   Some classes of stock cannot be traded publicly because of restrictions imposed by the Securities and Exchange Commission, or by the corporate charter or a trust agreement. 2006 tax software These restricted securities usually trade at a discount in relation to freely traded securities. 2006 tax software   To arrive at the FMV of restricted securities, factors that you must consider include the resale provisions found in the restriction agreements, the relative negotiating strengths of the buyer and seller, and the market experience of freely traded securities of the same class as the restricted securities. 2006 tax software Real Estate Because each piece of real estate is unique and its valuation is complicated, a detailed appraisal by a professional appraiser is necessary. 2006 tax software The appraiser must be thoroughly trained in the application of appraisal principles and theory. 2006 tax software In some instances the opinions of equally qualified appraisers may carry unequal weight, such as when one appraiser has a better knowledge of local conditions. 2006 tax software The appraisal report must contain a complete description of the property, such as street address, legal description, and lot and block number, as well as physical features, condition, and dimensions. 2006 tax software The use to which the property is put, zoning and permitted uses, and its potential use for other higher and better uses are also relevant. 2006 tax software In general, there are three main approaches to the valuation of real estate. 2006 tax software An appraisal may require the combined use of two or three methods rather than one method only. 2006 tax software 1. 2006 tax software Comparable Sales The comparable sales method compares the donated property with several similar properties that have been sold. 2006 tax software The selling prices, after adjustments for differences in date of sale, size, condition, and location, would then indicate the estimated FMV of the donated property. 2006 tax software If the comparable sales method is used to determine the value of unimproved real property (land without significant buildings, structures, or any other improvements that add to its value), the appraiser should consider the following factors when comparing the potential comparable property and the donated property: Location, size, and zoning or use restrictions, Accessibility and road frontage, and available utilities and water rights, Riparian rights (right of access to and use of the water by owners of land on the bank of a river) and existing easements, rights-of-way, leases, etc. 2006 tax software , Soil characteristics, vegetative cover, and status of mineral rights, and Other factors affecting value. 2006 tax software For each comparable sale, the appraisal must include the names of the buyer and seller, the deed book and page number, the date of sale and selling price, a property description, the amount and terms of mortgages, property surveys, the assessed value, the tax rate, and the assessor's appraised FMV. 2006 tax software The comparable selling prices must be adjusted to account for differences between the sale property and the donated property. 2006 tax software Because differences of opinion may arise between appraisers as to the degree of comparability and the amount of the adjustment considered necessary for comparison purposes, an appraiser should document each item of adjustment. 2006 tax software Only comparable sales having the least adjustments in terms of items and/or total dollar adjustments should be considered as comparable to the donated property. 2006 tax software 2. 2006 tax software Capitalization of Income This method capitalizes the net income from the property at a rate that represents a fair return on the particular investment at the particular time, considering the risks involved. 2006 tax software The key elements are the determination of the income to be capitalized and the rate of capitalization. 2006 tax software 3. 2006 tax software Replacement Cost New or Reproduction Cost Minus Observed Depreciation This method, used alone, usually does not result in a determination of FMV. 2006 tax software Instead, it generally tends to set the upper limit of value, particularly in periods of rising costs, because it is reasonable to assume that an informed buyer will not pay more for the real estate than it would cost to reproduce a similar property. 2006 tax software Of course, this reasoning does not apply if a similar property cannot be created because of location, unusual construction, or some other reason. 2006 tax software Generally, this method serves to support the value determined from other methods. 2006 tax software When the replacement cost method is applied to improved realty, the land and improvements are valued separately. 2006 tax software The replacement cost of a building is figured by considering the materials, the quality of workmanship, and the number of square feet or cubic feet in the building. 2006 tax software This cost represents the total cost of labor and material, overhead, and profit. 2006 tax software After the replacement cost has been figured, consideration must be given to the following factors: Physical deterioration—the wear and tear on the building itself, Functional obsolescence—usually in older buildings with, for example, inadequate lighting, plumbing, or heating, small rooms, or a poor floor plan, and Economic obsolescence—outside forces causing the whole area to become less desirable. 2006 tax software Interest in a Business The FMV of any interest in a business, whether a sole proprietorship or a partnership, is the amount that a willing buyer would pay for the interest to a willing seller after consideration of all relevant factors. 2006 tax software The relevant factors to be considered in valuing the business are: The FMV of the assets of the business, The demonstrated earnings capacity of the business, based on a review of past and current earnings, and The other factors used in evaluating corporate stock, if they apply. 2006 tax software The value of the goodwill of the business should also be taken into consideration. 2006 tax software You should keep complete financial and other information on which you base the valuation. 2006 tax software This includes copies of reports of examinations of the business made by accountants, engineers, or any technical experts on or close to the valuation date. 2006 tax software Annuities, Interests for Life or Terms of Years, Remainders, and Reversions The value of these kinds of property is their present value, except in the case of annuities under contracts issued by companies regularly engaged in their sale. 2006 tax software The valuation of these commercial annuity contracts and of insurance policies is discussed later under Certain Life Insurance and Annuity Contracts. 2006 tax software To determine present value, you must know the applicable interest rate and use actuarial tables. 2006 tax software Interest rate. 2006 tax software   The applicable interest rate varies. 2006 tax software It is announced monthly in a news release and published in the Internal Revenue Bulletin as a Revenue Ruling. 2006 tax software The interest rate to use is under the heading “Rate Under Section 7520” for a given month and year. 2006 tax software You can call the IRS office at 1-800-829-1040 to obtain this rate. 2006 tax software Actuarial tables. 2006 tax software   You need to refer to actuarial tables to determine a qualified interest in the form of an annuity, any interest for life or a term of years, or any remainder interest to a charitable organization. 2006 tax software   Use the valuation tables set forth in IRS Publications 1457, Actuarial Values (Book Aleph), and 1458, Actuarial Values (Book Beth). 2006 tax software Both of these publications provide tables containing actuarial factors to be used in determining the present value of an annuity, an interest for life or for a term of years, or a remainder or reversionary interest. 2006 tax software For qualified charitable transfers, you can use the factor for the month in which you made the contribution or for either of the 2 months preceding that month. 2006 tax software   Publication 1457 also contains actuarial factors for computing the value of a remainder interest in a charitable remainder annuity trust and a pooled income fund. 2006 tax software Publication 1458 contains the factors for valuing the remainder interest in a charitable remainder unitrust. 2006 tax software You can download Publications 1457 and 1458 from www. 2006 tax software irs. 2006 tax software gov. 2006 tax software In addition, they are available for purchase via the website of the U. 2006 tax software S. 2006 tax software Government Printing Office, by phone at (202) 512-1800, or by mail from the: Superintendent of Documents P. 2006 tax software O. 2006 tax software Box 371954 Pittsburgh, PA 15250-7954 Tables containing actuarial factors for transfers to pooled income funds may also be found in Income Tax Regulation 1. 2006 tax software 642(c)-6(e)(6), transfers to charitable remainder unitrusts in Regulation 1. 2006 tax software 664-4(e), and other transfers in Regulation 20. 2006 tax software 2031-7(d)(6). 2006 tax software Special factors. 2006 tax software   If you need a special factor for an actual transaction, you can request a letter ruling. 2006 tax software Be sure to include the date of birth of each person the duration of whose life may affect the value of the interest. 2006 tax software Also include copies of the relevant instruments. 2006 tax software IRS charges a user fee for providing special factors. 2006 tax software   For more information about requesting a ruling, see Revenue Procedure 2006-1 (or annual update), 2006-1 I. 2006 tax software R. 2006 tax software B. 2006 tax software 1. 2006 tax software Revenue Procedure 2006-1 is available at www. 2006 tax software irs. 2006 tax software gov/irb/2006-01_IRB/ar06. 2006 tax software html. 2006 tax software   For information on the circumstances under which a charitable deduction may be allowed for the donation of a partial interest in property not in trust, see Partial Interest in Property Not in Trust, later. 2006 tax software Certain Life Insurance and Annuity Contracts The value of an annuity contract or a life insurance policy issued by a company regularly engaged in the sale of such contracts or policies is the amount that company would charge for a comparable contract. 2006 tax software But if the donee of a life insurance policy may reasonably be expected to cash the policy rather than hold it as an investment, then the FMV is the cash surrender value rather than the replacement cost. 2006 tax software If an annuity is payable under a combination annuity contract and life insurance policy (for example, a retirement income policy with a death benefit) and there was no insurance element when it was transferred to the charity, the policy is treated as an annuity contract. 2006 tax software Partial Interest in Property Not in Trust Generally, no deduction is allowed for a charitable contribution, not made in trust, of less than your entire interest in property. 2006 tax software However, this does not apply to a transfer of less than your entire interest if it is a transfer of: A remainder interest in your personal residence or farm, An undivided part of your entire interest in property, or A qualified conservation contribution. 2006 tax software Remainder Interest in Real Property The amount of the deduction for a donation of a remainder interest in real property is the FMV of the remainder interest at the time of the contribution. 2006 tax software To determine this value, you must know the FMV of the property on the date of the contribution. 2006 tax software Multiply this value by the appropriate factor. 2006 tax software Publications 1457 and 1458 contain these factors. 2006 tax software You must make an adjustment for depreciation or depletion using the factors shown in Publication 1459, Actuarial Values (Book Gimel). 2006 tax software You can use the factors for the month in which you made the contribution or for either of the two months preceding that month. 2006 tax software See the earlier discussion on Annuities, Interests for Life or Terms of Years, Remainders, and Reversions. 2006 tax software You can download Publication 1459 from www. 2006 tax software irs. 2006 tax software gov. 2006 tax software For this purpose, the term “depreciable property” means any property subject to wear and tear or obsolescence, even if not used in a trade or business or for the production of income. 2006 tax software If the remainder interest includes both depreciable and nondepreciable property, for example a house and land, the FMV must be allocated between each kind of property at the time of the contribution. 2006 tax software This rule also applies to a gift of a remainder interest that includes property that is part depletable and part not depletable. 2006 tax software Take into account depreciation or depletion only for the property that is subject to depreciation or depletion. 2006 tax software For more information, see section 1. 2006 tax software 170A-12 of the Income Tax Regulations. 2006 tax software Undivided Part of Your Entire Interest A contribution of an undivided part of your entire interest in property must consist of a part of each and every substantial interest or right you own in the property. 2006 tax software It must extend over the entire term of your interest in the property. 2006 tax software For example, you are entitled to the income from certain property for your life (life estate) and you contribute 20% of that life estate to a qualified organization. 2006 tax software You can claim a deduction for the contribution if you do not have any other interest in the property. 2006 tax software To figure the value of a contribution involving a partial interest, see Publication 1457. 2006 tax software If the only interest you own in real property is a remainder interest and you transfer part of that interest to a qualified organization, see the previous discussion on valuation of a remainder interest in real property. 2006 tax software Qualified Conservation Contribution A qualified conservation contribution is a contribution of a qualified real property interest to a qualified organization to be used only for conservation purposes. 2006 tax software Qualified organization. 2006 tax software   For purposes of a qualified conservation contribution, a qualified organization is: A governmental unit, A publicly supported charitable, religious, scientific, literary, educational, etc. 2006 tax software , organization, or An organization that is controlled by, and operated for the exclusive benefit of, a governmental unit or a publicly supported charity. 2006 tax software The organization also must have a commitment to protect the conservation purposes of the donation and must have the resources to enforce the restrictions. 2006 tax software Conservation purposes. 2006 tax software   Your contribution must be made only for one of the following conservation purposes. 2006 tax software Preserving land areas for outdoor recreation by, or for the education of, the general public. 2006 tax software Protecting a relatively natural habitat of fish, wildlife, or plants, or a similar ecosystem. 2006 tax software Preserving open space, including farmland and forest land, if it yields a significant public benefit. 2006 tax software It must be either for the scenic enjoyment of the general public or under a clearly defined federal, state, or local governmental conservation policy. 2006 tax software Preserving a historically important land area or a certified historic structure. 2006 tax software There must be some visual public access to the property. 2006 tax software Factors used in determining the type and amount of public access required include the historical significance of the property, the remoteness or accessibility of the site, and the extent to which intrusions on the privacy of individuals living on the property would be unreasonable. 2006 tax software Building in registered historic district. 2006 tax software   A contribution after July 25, 2006, of a qualified real property interest that is an easement or other restriction on the exterior of a building in a registered historic district is deductible only if it meets all of the following three conditions. 2006 tax software The restriction must preserve the entire exterior of the building and must prohibit any change to the exterior of the building that is inconsistent with its historical character. 2006 tax software You and the organization receiving the contribution must enter into a written agreement certifying, that the organization is a qualified organization and that it has the resources and commitment to maintain the property as donated. 2006 tax software If you make the contribution in a tax year beginning after August 17, 2006, you must include with your return: A qualified appraisal, Photographs of the building's entire exterior, and A description of all restrictions on development of the building, such as zoning laws and restrictive covenants. 2006 tax software   If you make this type of contribution after February 12, 2007, and claim a deduction of more than $10,000, your deduction will not be allowed unless you pay a $500 filing fee. 2006 tax software See Form 8283-V, Payment Voucher for Filing Fee Under Section 170(f)(13), and its instructions. 2006 tax software Qualified real property interest. 2006 tax software   This is any of the following interests in real property. 2006 tax software Your entire interest in real estate other than a mineral interest (subsurface oil, gas, or other minerals, and the right of access to these minerals). 2006 tax software A remainder interest. 2006 tax software A restriction (granted in perpetuity) on the use that may be made of the real property. 2006 tax software Valuation. 2006 tax software   A qualified real property interest described in (1) should be valued in a manner that is consistent with the type of interest transferred. 2006 tax software If you transferred all the interest in the property, the FMV of the property is the amount of the contribution. 2006 tax software If you do not transfer the mineral interest, the FMV of the surface rights in the property is the amount of the contribution. 2006 tax software   If you owned only a remainder interest or an income interest (life estate), see Undivided Part of Your Entire Interest, earlier. 2006 tax software If you owned the entire property but transferred only a remainder interest (item (2)), see Remainder Interest in Real Property, earlier. 2006 tax software   In determining the value of restrictions, you should take into account the selling price in arm's-length transactions of other properties that have comparable restrictions. 2006 tax software If there are no comparable sales, the restrictions are valued indirectly as the difference between the FMVs of the property involved before and after the grant of the restriction. 2006 tax software   The FMV of the property before contribution of the restriction should take into account not only current use but the likelihood that the property, without the restriction, would be developed. 2006 tax software You should also consider any zoning, conservation, or historical preservation laws that would restrict development. 2006 tax software Granting an easement may increase, rather than reduce, the value of property, and in such a situation no deduction would be allowed. 2006 tax software Example. 2006 tax software   You own 10 acres of farmland. 2006 tax software Similar land in the area has an FMV of $2,000 an acre. 2006 tax software However, land in the general area that is restricted solely to farm use has an FMV of $1,500 an acre. 2006 tax software Your county wants to preserve open space and prevent further development in your area. 2006 tax software   You grant to the county an enforceable open space easement in perpetuity on 8 of the 10 acres, restricting its use to farmland. 2006 tax software The value of this easement is $4,000, determined as follows: FMV of the property before granting easement:   $2,000 × 10 acres $20,000 FMV of the property after granting easement:   $1,500 × 8 acres $12,000   $2,000 × 2 acres 4,000 16,000 Value of easement   $4,000   If you later transfer in fee your remaining interest in the 8 acres to another qualified organization, the FMV of your remaining interest is the FMV of the 8 acres reduced by the FMV of the easement granted to the first organization. 2006 tax software More information. 2006 tax software   For more information about qualified conservation contributions, see Publication 526. 2006 tax software Appraisals Appraisals are not necessary for items of property for which you claim a deduction of $5,000 or less. 2006 tax software (There is one exception, described next, for certain clothing and household items. 2006 tax software ) However, you generally will need an appraisal for donated property for which you claim a deduction of more than $5,000. 2006 tax software There are exceptions. 2006 tax software See Deductions of More Than $5,000, later. 2006 tax software The weight given an appraisal depends on the completeness of the report, the qualifications of the appraiser, and the appraiser's demonstrated knowledge of the donated property. 2006 tax software An appraisal must give all the facts on which to base an intelligent judgment of the value of the property. 2006 tax software The appraisal will not be given much weight if: All the factors that apply are not considered, The opinion is not supported with facts, such as purchase price and comparable sales, or The opinion is not consistent with known facts. 2006 tax software The appraiser's opinion is never more valid than the facts on which it is based; without these facts it is simply a guess. 2006 tax software The opinion of a person claiming to be an expert is not binding on the Internal Revenue Service. 2006 tax software All facts associated with the donation must be considered. 2006 tax software Deduction over $500 for certain clothing or household items. 2006 tax software   You must include with your return a qualified appraisal of any single item of clothing or any household item that is not in good used condition or better, that you donated after August 17, 2006, and for which you deduct more than $500. 2006 tax software See Household Goods and Used Clothing, earlier. 2006 tax software Cost of appraisals. 2006 tax software   You may not take a charitable contribution deduction for fees you pay for appraisals of your donated property. 2006 tax software However, these fees may qualify as a miscellaneous deduction, subject to the 2% limit, on Schedule A (Form 1040) if paid to determine the amount allowable as a charitable contribution. 2006 tax software Deductions of More Than $5,000 Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser, and you must attach Section B of Form 8283 to your tax return. 2006 tax software There are exceptions, discussed later. 2006 tax software You should keep the appraiser's report with your written records. 2006 tax software Records are discussed in Publication 526. 2006 tax software The phrase “similar items” means property of the same generic category or type (whether or not donated to the same donee), such as stamp collections, coin collections, lithographs, paintings, photographs, books, nonpublicly traded stock, nonpublicly traded securities other than nonpublicly traded stock, land, buildings, clothing, jewelry, furniture, electronic equipment, household appliances, toys, everyday kitchenware, china, crystal, or silver. 2006 tax software For example, if you give books to three schools and you deduct $2,000, $2,500, and $900, respectively, your claimed deduction is more than $5,000 for these books. 2006 tax software You must get a qualified appraisal of the books and for each school you must attach a fully completed Form 8283, Section B, to your tax return. 2006 tax software Exceptions. 2006 tax software   You do not need an appraisal if the property is: Nonpublicly traded stock of $10,000 or less, A vehicle (including a car, boat, or airplane) for which your deduction is limited to the gross proceeds from its sale, Qualified intellectual property, such as a patent, Certain publicly traded securities described next, Inventory and other property donated by a corporation that are “qualified contributions” for the care of the ill, the needy, or infants, within the meaning of section 170(e)(3)(A) of the Internal Revenue Code, or Stock in trade, inventory, or property held primarily for sale to customers in the ordinary course of your trade or business. 2006 tax software   Although an appraisal is not required for the types of property just listed, you must provide certain information about a donation of any of these types of property on Form 8283. 2006 tax software Publicly traded securities. 2006 tax software   Even if your claimed deduction is more than $5,000, neither a qualified appraisal nor Section B of Form 8283 is required for publicly traded securities that are: Listed on a stock exchange in which quotations are published on a daily basis, Regularly traded in a national or regional over-the-counter market for which published quotations are available, or Shares of an open-end investment company (mutual fund) for which quotations are published on a daily basis in a newspaper of general circulation throughout the United States. 2006 tax software Publicly traded securities that meet these requirements must be reported on Form 8283, Section A. 2006 tax software   A qualified appraisal is not required, but Form 8283, Section B, Parts I and IV, must be completed, for an issue of a security that does not meet the requirements just listed but does meet these requirements: The issue is regularly traded during the computation period (defined later) in a market for which there is an “interdealer quotation system” (defined later), The issuer or agent computes the “average trading price” (defined later) for the same issue for the computation period, The average trading price and total volume of the issue during the computation period are published in a newspaper of general circulation throughout the United States, not later than the last day of the month following the end of the calendar quarter in which the computation period ends, The issuer or agent keeps books and records that list for each transaction during the computation period the date of settlement of the transaction, the name and address of the broker or dealer making the market in which the transaction occurred, and the trading price and volume, and The issuer or agent permits the Internal Revenue Service to review the books and records described in item (4) with respect to transactions during the computation period upon receiving reasonable notice. 2006 tax software   An interdealer quotation system is any system of general circulation to brokers and dealers that regularly disseminates quotations of obligations by two or more identified brokers or dealers who are not related to either the issuer or agent who computes the average trading price of the security. 2006 tax software A quotation sheet prepared and distributed by a broker or dealer in the regular course of business and containing only quotations of that broker or dealer is not an interdealer quotation system. 2006 tax software   The average trading price is the average price of all transactions (weighted by volume), other than original issue or redemption transactions, conducted through a United States office of a broker or dealer who maintains a market in the issue of the security during the computation period. 2006 tax software Bid and asked quotations are not taken into account. 2006 tax software   The computation period is weekly during October through December and monthly during January through September. 2006 tax software The weekly computation periods during October through December begin with the first Monday in October and end with the first Sunday following the last Monday in December. 2006 tax software Nonpublicly traded stock. 2006 tax software   If you contribute nonpublicly traded stock, for which you claim a deduction of $10,000 or less, a qualified appraisal is not required. 2006 tax software However, you must attach Form 8283 to your tax return, with Section B, Parts I and IV, completed. 2006 tax software Deductions of More Than $500,000 If you claim a deduction of more than $500,000 for a donation of property, you must attach a qualified appraisal of the property to your return. 2006 tax software This does not apply to contributions of cash, inventory, publicly traded stock, or intellectual property. 2006 tax software If you do not attach the appraisal, you cannot deduct your contribution, unless your failure to attach the appraisal is due to reasonable cause and not to willful neglect. 2006 tax software Qualified Appraisal Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser. 2006 tax software You must also complete Form 8283, Section B, and attach it to your tax return. 2006 tax software See Deductions of More Than $5,000, earlier. 2006 tax software A qualified appraisal is an appraisal document that: Is made, signed, and dated by a qualified appraiser (defined later) in accordance with generally accepted appraisal standards, Meets the relevant requirements of Regulations section 1. 2006 tax software 170A-13(c)(3) and Notice 2006-96, 2006-46 I. 2006 tax software R. 2006 tax software B. 2006 tax software 902 (available at www. 2006 tax software irs. 2006 tax software gov/irb/2006-46_IRB/ar13. 2006 tax software html), Relates to an appraisal made not earlier than 60 days before the date of contribution of the appraised property, Does not involve a prohibited appraisal fee, and Includes certain information (covered later). 2006 tax software You must receive the qualified appraisal before the due date, including extensions, of the return on which a charitable contribution deduction is first claimed for the donated property. 2006 tax software If the deduction is first claimed on an amended return, the qualified appraisal must be received before the date on which the amended return is filed. 2006 tax software Form 8283, Section B, must be attached to your tax return. 2006 tax software Generally, you do not need to attach the qualified appraisal itself, but you should keep a copy as long as it may be relevant under the tax law. 2006 tax software There are four exceptions. 2006 tax software If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the appraisal. 2006 tax software See Paintings, Antiques, and Other Objects of Art, earlier. 2006 tax software If you claim a deduction of more than $500,000 for a donation of property, you must attach the appraisal. 2006 tax software See Deductions of More Than $500,000, earlier. 2006 tax software If you claim a deduction of more than $500 for an article of clothing, or a household item, that is not in good used condition or better, that you donated after August 17, 2006, you must attach the appraisal. 2006 tax software See Deduction over $500 for certain clothing or household items, earlier. 2006 tax software If you claim a deduction in a tax year beginning after August 17, 2006, for an easement or other restriction on the exterior of a building in a historic district, you must attach the appraisal. 2006 tax software See Building in registered historic district, earlier. 2006 tax software Prohibited appraisal fee. 2006 tax software   Generally, no part of the fee arrangement for a qualified appraisal can be based on a percentage of the appraised value of the property. 2006 tax software If a fee arrangement is based on what is allowed as a deduction, after Internal Revenue Service examination or otherwise, it is treated as a fee based on a percentage of appraised value. 2006 tax software However, appraisals are not disqualified when an otherwise prohi
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CP 297A - Notice of Levy and Notice of Your Right to a Hearing

Details About This Notice:
Sample Content: Page 1, Page 2
Purpose:   We send CP 297A to notify the recipient of our levy and of  their right to a hearing.
Reason for Issuance:   There is a balance due on the recipient's account we've previously asked them to pay. We're sending the notice to inform them the account is still unpaid and to notify them of our levy and of their right to receive appeals consideration.
Account Balance:   Balance Due
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Page Last Reviewed or Updated: 31-Mar-2014

The 2006 Tax Software

2006 tax software 1. 2006 tax software   Importance of Records Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Benefits of Recordkeeping Kinds of Records To Keep How Long To Keep Records Introduction A farmer, like other taxpayers, must keep records to prepare an accurate income tax return and determine the correct amount of tax. 2006 tax software This chapter explains the benefits of keeping records, what kinds of records you must keep, and how long you must keep them for federal tax purposes. 2006 tax software Tax records are not the only type of records you need to keep for your farming business. 2006 tax software You should also keep records that measure your farm's financial performance. 2006 tax software This publication only discusses tax records. 2006 tax software The Farm Financial Standards Council has produced a publication that provides a detailed explanation of the recommendations of the Council for financial reporting and analysis. 2006 tax software For information on recordkeeping, you can purchase and download Financial Guidelines for Agricultural Producers at www. 2006 tax software ffsc. 2006 tax software org. 2006 tax software For more information, contact Countryside Marketing, Inc. 2006 tax software in the following manner. 2006 tax software Call 262-253-6902. 2006 tax software Send a fax to 262-253-6903. 2006 tax software Write to: Farm Financial Standards Council N78 W14573 Appleton Ave. 2006 tax software , #287 Menomonee Falls, WI 53051. 2006 tax software Topics - This chapter discusses: Benefits of recordkeeping Kinds of records to keep How long to keep records Useful Items - You may want to see: Publication 51 (Circular A), Agricultural Employer's Tax Guide 463 Travel, Entertainment, Gift, and Car Expenses See chapter 16 for information about getting publications. 2006 tax software Benefits of Recordkeeping Everyone in business, including farmers, must keep appropriate records. 2006 tax software Recordkeeping will help you do the following. 2006 tax software Monitor the progress of your farming business. 2006 tax software   You need records to monitor the progress of your farming business. 2006 tax software Records can show whether your business is improving, which items are selling, or what changes you need to make. 2006 tax software Records can help you make better decisions that may increase the likelihood of business success. 2006 tax software Prepare your financial statements. 2006 tax software   You need records to prepare accurate financial statements. 2006 tax software These include income (profit and loss) statements and balance sheets. 2006 tax software These statements can help you in dealing with your bank or creditors and help you to manage your farm business. 2006 tax software Identify source of receipts. 2006 tax software   You will receive money or property from many sources. 2006 tax software Your records can identify the source of your receipts. 2006 tax software You need this information to separate farm from nonfarm receipts and taxable from nontaxable income. 2006 tax software Keep track of deductible expenses. 2006 tax software   You may forget expenses when you prepare your tax return unless you record them when they occur. 2006 tax software Prepare your tax returns. 2006 tax software   You need records to prepare your tax return. 2006 tax software For example, your records must support the income, expenses, and credits you report. 2006 tax software Generally, these are the same records you use to monitor your farming business and prepare your financial statements. 2006 tax software Support items reported on tax returns. 2006 tax software   You must keep your business records available at all times for inspection by the IRS. 2006 tax software If the IRS examines any of your tax returns, you may be asked to explain the items reported. 2006 tax software A complete set of records will speed up the examination. 2006 tax software Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. 2006 tax software You can choose any recordkeeping system suited to your farming business that clearly shows, for example, your income and expenses. 2006 tax software You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. 2006 tax software See  chapter 2. 2006 tax software If you are in more than one business, you should keep a complete and separate set of records for each business. 2006 tax software A corporation should keep minutes of board of directors' meetings. 2006 tax software Your recordkeeping system should include a summary of your business transactions. 2006 tax software This summary is ordinarily made in accounting journals and ledgers. 2006 tax software For example, they must show your gross income, as well as your deductions and credits. 2006 tax software In addition, you must keep supporting documents. 2006 tax software Purchases, sales, payroll, and other transactions you have in your business generate supporting documents such as invoices and receipts. 2006 tax software These documents contain the information you need to record in your journals and ledgers. 2006 tax software It is important to keep these documents because they support the entries in your journals and ledgers and on your tax return. 2006 tax software Keep them in an orderly fashion and in a safe place. 2006 tax software For instance, organize them by year and type of income or expense. 2006 tax software Electronic records. 2006 tax software   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. 2006 tax software When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. 2006 tax software An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. 2006 tax software The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. 2006 tax software All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. 2006 tax software Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. 2006 tax software The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. 2006 tax software You still have the responsibility of retaining any other books and records that are required to be retained. 2006 tax software The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. 2006 tax software This test is not considered an examination and the results must be shared with you. 2006 tax software If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. 2006 tax software If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copybooks and records in a manner that allows you and the IRS to determine your correct tax. 2006 tax software For details on electronic storage system requirements, see Rev. 2006 tax software Proc. 2006 tax software 97-22. 2006 tax software You can find Rev. 2006 tax software Proc. 2006 tax software 97-22 on page 9 of Internal Revenue Bulletin 1997-13 at  www. 2006 tax software irs. 2006 tax software gov/pub/irs-irbs/irb97-13. 2006 tax software pdf. 2006 tax software Travel, transportation, entertainment, and gift expenses. 2006 tax software   Specific recordkeeping rules apply to these expenses. 2006 tax software For more information, see Publication 463. 2006 tax software Employment taxes. 2006 tax software   There are specific employment tax records you must keep. 2006 tax software For a list, see Publication 51 (Circular A). 2006 tax software Excise taxes. 2006 tax software   See How To Claim a Credit or Refund in chapter 14 for the specific records you must keep to verify your claim for credit or refund of excise taxes on certain fuels. 2006 tax software Assets. 2006 tax software   Assets are the property, such as machinery and equipment, you own and use in your business. 2006 tax software You must keep records to verify certain information about your business assets. 2006 tax software You need records to figure your annual depreciation deduction and the gain or (loss) when you sell the assets. 2006 tax software Your records should show all the following. 2006 tax software When and how you acquired the asset. 2006 tax software Purchase price. 2006 tax software Cost of any improvements. 2006 tax software Section 179 deduction taken. 2006 tax software Deductions taken for depreciation. 2006 tax software Deductions taken for casualty losses, such as losses resulting from fires or storms. 2006 tax software How you used the asset. 2006 tax software When and how you disposed of the asset. 2006 tax software Selling price. 2006 tax software Expenses of sale. 2006 tax software   The following are examples of records that may show this information. 2006 tax software Purchase and sales invoices. 2006 tax software Real estate closing statements. 2006 tax software Canceled checks. 2006 tax software Bank statements. 2006 tax software Financial account statements as proof of payment. 2006 tax software   If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. 2006 tax software These include account statements prepared for the financial institution by a third party. 2006 tax software These account statements must be legible. 2006 tax software The following table lists acceptable account statements. 2006 tax software IF payment is by. 2006 tax software . 2006 tax software . 2006 tax software THEN the statement must show the. 2006 tax software . 2006 tax software . 2006 tax software Check Check number. 2006 tax software Amount. 2006 tax software Payee's name. 2006 tax software Date the check amount was posted to the account by the financial institution. 2006 tax software Electronic funds  transfer Amount transferred. 2006 tax software Payee's name. 2006 tax software Date the transfer was posted to the account by the financial institution. 2006 tax software Credit card Amount charged. 2006 tax software Payee's name. 2006 tax software Transaction date. 2006 tax software    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. 2006 tax software You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. 2006 tax software Tax returns. 2006 tax software   Keep copies of your filed tax returns. 2006 tax software They help in preparing future tax returns and making computations if you file an amended return. 2006 tax software Keep copies of your information returns such as Form 1099, Schedule K-1, and Form W-2. 2006 tax software How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. 2006 tax software Keep records that support an item of income or a deduction appearing on a return until the period of limitations for the return runs out. 2006 tax software A period of limitations is the period of time after which no legal action can be brought. 2006 tax software Generally, that means you must keep your records for at least 3 years from when your tax return was due or filed or within 2 years of the date the tax was paid, whichever is later. 2006 tax software However, certain records must be kept for a longer period of time, as discussed below. 2006 tax software Employment taxes. 2006 tax software   If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. 2006 tax software Assets. 2006 tax software   Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. 2006 tax software You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure your basis for computing gain or (loss) when you sell or otherwise dispose of the property. 2006 tax software   You may need to keep records relating to the basis of property longer than the period of limitation. 2006 tax software Keep those records as long as they are important in figuring the basis of the original or replacement property. 2006 tax software Generally, this means as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. 2006 tax software For example, if you received property in a nontaxable exchange, you must keep the records for the old property, as well as for the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. 2006 tax software For more information on basis, see chapter 6. 2006 tax software Records for nontax purposes. 2006 tax software   When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. 2006 tax software For example, your insurance company or creditors may require you to keep them longer than the IRS does. 2006 tax software Prev  Up  Next   Home   More Online Publications