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Amended 1040

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Amended 1040

Amended 1040 33. Amended 1040   Credit for the Elderly or the Disabled Table of Contents Introduction Useful Items - You may want to see: Are You Eligible for the Credit?Qualified Individual Income Limits How to Claim the CreditCredit Figured for You Credit Figured by You Introduction If you qualify, you may be able to reduce the tax you owe by taking the credit for the elderly or the disabled which is figured on Schedule R (Form 1040A or 1040). Amended 1040 This chapter explains the following. Amended 1040 Who qualifies for the credit for the elderly or the disabled. Amended 1040 How to claim the credit. Amended 1040 You may be able to take the credit for the elderly or the disabled if: You are age 65 or older at the end of 2013, or You retired on permanent and total disability and have taxable disability income. Amended 1040 Useful Items - You may want to see: Publication 524 Credit for the Elderly or the Disabled 554 Tax Guide for Seniors Form (and Instruction) Schedule R (Form 1040A or 1040) Credit for the Elderly or the Disabled Are You Eligible for the Credit? You can take the credit for the elderly or the disabled if you meet both of the following requirements. Amended 1040 You are a qualified individual. Amended 1040 Your income is not more than certain limits. Amended 1040 You can use Figure 33-A and Table 33-1 as guides to see if you are eligible for the credit. Amended 1040 Use Figure 33-A first to see if you are a qualified individual. Amended 1040 If you are, go to Table 33-1 to make sure your income is not too high to take the credit. Amended 1040 You can take the credit only if you file Form 1040 or Form 1040A. Amended 1040 You cannot take the credit if you file Form 1040EZ. Amended 1040 Qualified Individual You are a qualified individual for this credit if you are a U. Amended 1040 S. Amended 1040 citizen or resident alien, and either of the following applies. Amended 1040 You were age 65 or older at the end of 2013. Amended 1040 You were under age 65 at the end of 2013 and all three of the following statements are true. Amended 1040 You retired on permanent and total disability (explained later). Amended 1040 You received taxable disability income for 2013. Amended 1040 On January 1, 2013, you had not reached mandatory retirement age (defined later under Disability income ). Amended 1040 Age 65. Amended 1040   You are considered to be age 65 on the day before your 65th birthday. Amended 1040 Therefore, if you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Amended 1040 U. Amended 1040 S. Amended 1040 Citizen or Resident Alien You must be a U. Amended 1040 S. Amended 1040 citizen or resident alien (or be treated as a resident alien) to take the credit. Amended 1040 Generally, you cannot take the credit if you were a nonresident alien at any time during the tax year. Amended 1040 Exceptions. Amended 1040   You may be able to take the credit if you are a nonresident alien who is married to a U. Amended 1040 S. Amended 1040 citizen or resident alien at the end of the tax year and you and your spouse choose to treat you as a U. Amended 1040 S. Amended 1040 resident alien. Amended 1040 If you make that choice, both you and your spouse are taxed on your worldwide incomes. Amended 1040 If you were a nonresident alien at the beginning of the year and a resident alien at the end of the year, and you were married to a U. Amended 1040 S. Amended 1040 citizen or resident alien at the end of the year, you may be able to choose to be treated as a U. Amended 1040 S. Amended 1040 resident alien for the entire year. Amended 1040 In that case, you may be allowed to take the credit. Amended 1040 For information on these choices, see chapter 1 of Publication 519, U. Amended 1040 S. Amended 1040 Tax Guide for Aliens. Amended 1040 Married Persons Generally, if you are married at the end of the tax year, you and your spouse must file a joint return to take the credit. Amended 1040 However, if you and your spouse did not live in the same household at any time during the tax year, you can file either a joint return or separate returns and still take the credit. Amended 1040 Head of household. Amended 1040   You can file as head of household and qualify to take the credit, even if your spouse lived with you during the first 6 months of the year, if you meet certain tests. Amended 1040 See Head of Household in chapter 2 for the tests you must meet. Amended 1040 Under Age 65 If you are under age 65 at the end of 2013, you can qualify for the credit only if you are retired on permanent and total disability (discussed next) and have taxable disability income (discussed later under Disability income ). Amended 1040 You are retired on permanent and total disability if: You were permanently and totally disabled when you retired, and You retired on disability before the close of the tax year. Amended 1040 Even if you do not retire formally, you may be considered retired on disability when you have stopped working because of your disability. Amended 1040 If you retired on disability before 1977, and were not permanently and totally disabled at the time, you can qualify for the credit if you were permanently and totally disabled on January 1, 1976, or January 1, 1977. Amended 1040 Permanent and total disability. Amended 1040    You are permanently and totally disabled if you cannot engage in any substantial gainful activity because of your physical or mental condition. Amended 1040 A qualified physician must certify that the condition has lasted or can be expected to last continuously for 12 months or more, or that the condition can be expected to result in death. Amended 1040 See Physician's statement , later. Amended 1040 Substantial gainful activity. Amended 1040   Substantial gainful activity is the performance of significant duties over a reasonable period of time while working for pay or profit, or in work generally done for pay or profit. Amended 1040 Full-time work (or part-time work done at your employer's convenience) in a competitive work situation for at least the minimum wage conclusively shows that you are able to engage in substantial gainful activity. Amended 1040   Substantial gainful activity is not work you do to take care of yourself or your home. Amended 1040 It is not unpaid work on hobbies, institutional therapy or training, school attendance, clubs, social programs, and similar activities. Amended 1040 However, doing this kind of work may show that you are able to engage in substantial gainful activity. Amended 1040    The fact that you have not worked for some time is not, of itself, conclusive evidence that you cannot engage in substantial gainful activity. Amended 1040 Sheltered employment. Amended 1040   Certain work offered at qualified locations to physically or mentally impaired persons is considered sheltered employment. Amended 1040 These qualified locations are in sheltered workshops, hospitals, and similar institutions, homebound programs, and Department of Veterans Affairs (VA) sponsored homes. Amended 1040   Compared to commercial employment, pay is lower for sheltered employment. Amended 1040 Therefore, one usually does not look for sheltered employment if he or she can get other employment. Amended 1040 The fact that one has accepted sheltered employment is not proof of the person's ability to engage in substantial gainful activity. Amended 1040 Physician's statement. Amended 1040   If you are under age 65, you must have your physician complete a statement certifying that you were permanently and totally disabled on the date you retired. Amended 1040 You can use the statement in the Instructions for Schedule R. Amended 1040    Figure 33-A. Amended 1040 Are You a Qualified Individual? This image is too large to be displayed in the current screen. Amended 1040 Please click the link to view the image. Amended 1040 Figure 33-A Are You a Qualified Individual?   You do not have to file this statement with your Form 1040 or Form 1040A, but you must keep it for your records. Amended 1040 Veterans. Amended 1040   If the Department of Veterans Affairs (VA) certifies that you are permanently and totally disabled, you can substitute VA Form 21-0172, Certification of Permanent and Total Disability, for the physician's statement you are required to keep. Amended 1040 VA Form 21-0172 must be signed by a person authorized by the VA to do so. Amended 1040 You can get this form from your local VA regional office. Amended 1040 Physician's statement obtained in earlier year. Amended 1040   If you got a physician's statement in an earlier year and, due to your continued disabled condition, you were unable to engage in any substantial gainful activity during 2013, you may not need to get another physician's statement for 2013. Amended 1040 For a detailed explanation of the conditions you must meet, see the instructions for Schedule R, Part II. Amended 1040 If you meet the required conditions, check the box on your Schedule R, Part II, line 2. Amended 1040   If you checked box 4, 5, or 6 in Part I of Schedule R, enter in the space above the box on line 2 in Part II the first name(s) of the spouse(s) for whom the box is checked. Amended 1040 Table 33-1. Amended 1040 Income Limits IF your filing status is . Amended 1040 . Amended 1040 . Amended 1040 THEN, even if you qualify (see Figure 33-A ), you CANNOT take the credit if. Amended 1040 . Amended 1040 . Amended 1040   Your adjusted gross income (AGI)* is equal to or more than. Amended 1040 . Amended 1040 . Amended 1040     OR the total of your nontaxable social security and other nontaxable pension(s), annuities, or disability income is equal to or more than. Amended 1040 . Amended 1040 . Amended 1040   single, head of household, or qualifying widow(er) with dependent child   $17,500     $5,000   married filing jointly and only one spouse qualifies in Figure 33-A   $20,000     $5,000   married filing jointly and both spouses qualify in Figure 33-A   $25,000     $7,500   married filing separately and you lived apart from your spouse for all of 2013   $12,500     $3,750   * AGI is the amount on Form 1040A, line 22, or Form 1040, line 38. Amended 1040 Disability income. Amended 1040   If you are under age 65, you must also have taxable disability income to qualify for the credit. Amended 1040 Disability income must meet both of the following requirements. Amended 1040 It must be paid under your employer's accident or health plan or pension plan. Amended 1040 It must be included in your income as wages (or payments instead of wages) for the time you are absent from work because of permanent and total disability. Amended 1040 Payments that are not disability income. Amended 1040   Any payment you receive from a plan that does not provide for disability retirement is not disability income. Amended 1040 Any lump-sum payment for accrued annual leave that you receive when you retire on disability is a salary payment and is not disability income. Amended 1040   For purposes of the credit for the elderly or the disabled, disability income does not include amounts you receive after you reach mandatory retirement age. Amended 1040 Mandatory retirement age is the age set by your employer at which you would have had to retire, had you not become disabled. Amended 1040 Income Limits To determine if you can claim the credit, you must consider two income limits. Amended 1040 The first limit is the amount of your adjusted gross income (AGI). Amended 1040 The second limit is the amount of nontaxable social security and other nontaxable pensions, annuities, or disability income you received. Amended 1040 The limits are shown in Table 33-1. Amended 1040 If your AGI and nontaxable pensions, annuities, or disability income are less than the income limits, you may be able to claim the credit. Amended 1040 See How to Claim the Credit , later. Amended 1040 If either your AGI or your nontaxable pensions, annuities, or disability income are equal to or more than the income limits, you cannot take the credit. Amended 1040 How to Claim the Credit You can figure the credit yourself or the Internal Revenue Service will figure it for you. Amended 1040 Credit Figured for You If you choose to have the IRS figure the credit for you, read the following discussion for the form you will file (Form 1040 or 1040A). Amended 1040 If you want the IRS to figure your tax, see chapter 30. Amended 1040 Form 1040. Amended 1040   If you want the IRS to figure your credit, see Form 1040 Line Entries under Tax Figured by IRS in chapter 30. Amended 1040 Form 1040A. Amended 1040   If you want the IRS to figure your credit, see Form 1040A Line Entries under Tax Figured by IRS in chapter 30. Amended 1040 Credit Figured by You If you choose to figure the credit yourself, fill out the front of Schedule R. Amended 1040 Next, fill out Schedule R, Part III. Amended 1040 If you file Form 1040A, enter the amount from Schedule R, line 22, on Form 1040A, line 30. Amended 1040 If you file Form 1040, include the amount from Schedule R, line 22, on line 53; check box c, and enter “Sch R” on the line next to that box. Amended 1040 For a step-by-step discussion about filling out Part III of Schedule R, see Figuring the Credit Yourself in Publication 524. Amended 1040 Limit on credit. Amended 1040   The amount of the credit you can claim is generally limited to the amount of your tax. Amended 1040 Use the Credit Limit Worksheet in the Instructions for Schedule R to determine if your credit is limited. Amended 1040 Prev  Up  Next   Home   More Online Publications
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CP 91 - Final Notice Before Levy on Social Security Benefits

Details About This Notice:
Sample Content: Page 1, Page 2
Purpose:   We send CP 91 to inform the recipient of our intent to levy on their Social Security Benefits.
Reason for Issuance:   The recipient has a balance due on their account that we've previously sent a notice about. That balance due is still unpaid. We send a CP 91 to inform the recipient that the amount is still due, that we intend to take up to 15% of their their Social Security Benefits to pay it, and what steps they need to take within 30 days to prevent us from taking this action.
Account Balance:   Balance Due
     

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Page Last Reviewed or Updated: 25-Feb-2014

The Amended 1040

Amended 1040 Publication 561 - Main Contents Table of Contents What Is Fair Market Value (FMV)?Factors. Amended 1040 Stock. Amended 1040 Options. Amended 1040 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). Amended 1040 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. Amended 1040 Fair market value. Amended 1040   Fair market value (FMV) is the price that property would sell for on the open market. Amended 1040 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. Amended 1040 If you put a restriction on the use of property you donate, the FMV must reflect that restriction. Amended 1040 Example 1. Amended 1040 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. Amended 1040 Usually, such items are worth far less than what you paid for them. Amended 1040 Example 2. Amended 1040 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. Amended 1040 Factors. Amended 1040   In making and supporting the valuation of property, all factors affecting value are relevant and must be considered. Amended 1040 These include: The cost or selling price of the item, Sales of comparable properties, Replacement cost, and Opinions of experts. Amended 1040   These factors are discussed later. Amended 1040 Also, see Table 1 for a summary of questions to ask as you consider each factor. Amended 1040 Date of contribution. Amended 1040   Ordinarily, the date of a contribution is the date that the transfer of the property takes place. Amended 1040 Stock. Amended 1040   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. Amended 1040 If the certificate is mailed and received through the regular mail, it is the date of mailing. Amended 1040 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. Amended 1040 Options. Amended 1040   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. Amended 1040 The amount of the contribution is the FMV of the property on the date the option is exercised minus the exercise price. Amended 1040 Example. Amended 1040 You grant an option to a local university, which is a qualified organization, to buy real property. Amended 1040 Under the option, the university could buy the property at any time during a 2-year period for $40,000. Amended 1040 The FMV of the property on the date the option is granted is $50,000. Amended 1040 In the following tax year, the university exercises the option. Amended 1040 The FMV of the property on the date the option is exercised is $55,000. Amended 1040 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. Amended 1040 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. Amended 1040 Usually it is not that simple. Amended 1040 Using such formulas, etc. Amended 1040 , seldom results in an acceptable determination of FMV. Amended 1040 There is no single formula that always applies when determining the value of property. Amended 1040 This is not to say that a valuation is only guesswork. Amended 1040 You must consider all the facts and circumstances connected with the property, such as its desirability, use, and scarcity. Amended 1040 For example, donated furniture should not be evaluated at some fixed rate such as 15% of the cost of new replacement furniture. Amended 1040 When the furniture is contributed, it may be out of style or in poor condition, therefore having little or no market value. Amended 1040 On the other hand, it may be an antique, the value of which could not be determined by using any formula. Amended 1040 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. Amended 1040 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. Amended 1040 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. Amended 1040 Example. Amended 1040 Tom Morgan, who is not a dealer in gems, bought an assortment of gems for $5,000 from a promoter. Amended 1040 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. Amended 1040 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. Amended 1040 Tom gave the gems to a qualified charity 13 months after buying them. Amended 1040 The selling price for these gems had not changed from the date of purchase to the date he donated them to charity. Amended 1040 The best evidence of FMV depends on actual transactions and not on some artificial estimate. Amended 1040 The $5,000 charged Tom and others is, therefore, the best evidence of the maximum FMV of the gems. Amended 1040 Terms of the purchase or sale. Amended 1040   The terms of the purchase or sale should be considered in determining FMV if they influenced the price. Amended 1040 These terms include any restrictions, understandings, or covenants limiting the use or disposition of the property. Amended 1040 Rate of increase or decrease in value. Amended 1040   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. Amended 1040 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. Amended 1040 Example. Amended 1040 Bill Brown bought a painting for $10,000. Amended 1040 Thirteen months later he gave it to an art museum, claiming a charitable deduction of $15,000 on his tax return. Amended 1040 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. Amended 1040 Arm's-length offer. Amended 1040   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. Amended 1040 To rely on an offer, you should be able to show proof of the offer and the specific amount to be paid. Amended 1040 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. Amended 1040 Sales of Comparable Properties The sales prices of properties similar to the donated property are often important in determining the FMV. Amended 1040 The weight to be given to each sale depends on the following. Amended 1040 The degree of similarity between the property sold and the donated property. Amended 1040 The time of the sale—whether it was close to the valuation date. Amended 1040 The circumstances of the sale—whether it was at arm's-length with a knowledgeable buyer and seller, with neither having to act. Amended 1040 The conditions of the market in which the sale was made—whether unusually inflated or deflated. Amended 1040 The comparable sales method of valuing real estate is explained later under Valuation of Various Kinds of Property. Amended 1040 Example 1. Amended 1040 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. Amended 1040 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. Amended 1040 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. Amended 1040 Thirteen months later she gave all the Bibles to a church that she selected from a list provided by the promoter. Amended 1040 At the time of her donation, wholesale dealers were selling similar quantities of Bibles to the general public for $10,000. Amended 1040 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. Amended 1040 Example 2. Amended 1040 The facts are the same as in Example 1, except that the promoter gave Mary Black a second option. Amended 1040 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. Amended 1040 The principal and interest on the note would not be due for 12 years. Amended 1040 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. Amended 1040 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. Amended 1040 At the time of the gift, the promoter was selling similar lots of Bibles for either $10,000 or $30,000. Amended 1040 The difference between the two prices was solely at the discretion of the buyer. Amended 1040 The promoter was a willing seller for $10,000. Amended 1040 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. Amended 1040 Replacement Cost The cost of buying, building, or manufacturing property similar to the donated item should be considered in determining FMV. Amended 1040 However, there must be a reasonable relationship between the replacement cost and the FMV. Amended 1040 The replacement cost is the amount it would cost to replace the donated item on the valuation date. Amended 1040 Often there is no relationship between the replacement cost and the FMV. Amended 1040 If the supply of the donated property is more or less than the demand for it, the replacement cost becomes less important. Amended 1040 To determine the replacement cost of the donated property, find the “estimated replacement cost new. Amended 1040 ” Then subtract from this figure an amount for depreciation due to the physical condition and obsolescence of the donated property. Amended 1040 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. Amended 1040 ” 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. Amended 1040 For an expert's opinion to deserve much weight, the facts must support the opinion. Amended 1040 For additional information, see Appraisals, later. Amended 1040 Table 1. Amended 1040 Factors That Affect FMV IF the factor you are considering is. Amended 1040 . Amended 1040 . Amended 1040 THEN you should ask these questions. Amended 1040 . Amended 1040 . Amended 1040     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. Amended 1040 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. Amended 1040 When you rely on sales of comparable property, the sales must have been made in an open market. Amended 1040 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. Amended 1040 For example, liquidation sale prices usually do not indicate the FMV. Amended 1040 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. Amended 1040 Selection of Comparable Sales Using sales of comparable property is an important method for determining the FMV of donated property. Amended 1040 However, the amount of weight given to a sale depends on the degree of similarity between the comparable and the donated properties. Amended 1040 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. Amended 1040 Example. Amended 1040 You give a rare, old book to your former college. Amended 1040 The book is a third edition and is in poor condition because of a missing back cover. Amended 1040 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. Amended 1040 Although the contents are the same, the books are not at all similar because of the different editions and their physical condition. Amended 1040 Little consideration would be given to the selling price of the $300 property by knowledgeable buyers or sellers. Amended 1040 Future Events You may not consider unexpected events happening after your donation of property in making the valuation. Amended 1040 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. Amended 1040 Example. Amended 1040 You give farmland to a qualified charity. Amended 1040 The transfer provides that your mother will have the right to all income and full use of the property for her life. Amended 1040 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. Amended 1040 You may not take a higher deduction because the charity received full use and possession of the land only 1 week after the transfer. Amended 1040 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. Amended 1040 Example. Amended 1040 You give all your rights in a successful patent to your favorite charity. Amended 1040 Your records show that before the valuation date there were three stages in the patent's history of earnings. Amended 1040 First, there was rapid growth in earnings when the invention was introduced. Amended 1040 Then, there was a period of high earnings when the invention was being exploited. Amended 1040 Finally, there was a decline in earnings when competing inventions were introduced. Amended 1040 The entire history of earnings may be relevant in estimating the future earnings. Amended 1040 However, the appraiser must not rely too much on the stage of rapid growth in earnings, or of high earnings. Amended 1040 The market conditions at those times do not represent the condition of the market at the valuation date. Amended 1040 What is most significant is the trend of decline in earnings up to the valuation date. Amended 1040 For more information about donations of patents, see Patents, later. Amended 1040 Valuation of Various Kinds of Property This section contains information on determining the FMV of ordinary kinds of donated property. Amended 1040 For information on appraisals, see Appraisals, later. Amended 1040 Household Goods The FMV of used household goods, such as furniture, appliances, and linens, is usually much lower than the price paid when new. Amended 1040 Such used property may have little or no market value because of its worn condition. Amended 1040 It may be out of style or no longer useful. Amended 1040 You cannot take a deduction for household goods donated after August 17, 2006, unless they are in good used condition or better. Amended 1040 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. Amended 1040 See Deduction over $500 for certain clothing or household items, later. Amended 1040 If the property is valuable because it is old or unique, see the discussion under Paintings, Antiques, and Other Objects of Art. Amended 1040 Used Clothing Used clothing and other personal items are usually worth far less than the price you paid for them. Amended 1040 Valuation of items of clothing does not lend itself to fixed formulas or methods. Amended 1040 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. Amended 1040 You cannot take a deduction for clothing donated after August 17, 2006, unless it is in good used condition or better. Amended 1040 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. Amended 1040 See Deduction over $500 for certain clothing or household items, later. Amended 1040 For valuable furs or very expensive gowns, a Form 8283 may have to be sent with your tax return. Amended 1040 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. Amended 1040 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. Amended 1040 If not in fashion, the possibility of having the property redesigned, recut, or reset should be reported in the appraisal. Amended 1040 The stone's coloring, weight, cut, brilliance, and flaws should be reported and analyzed. Amended 1040 Sentimental personal value has no effect on FMV. Amended 1040 But if the jewelry was owned by a famous person, its value might increase. Amended 1040 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. Amended 1040 Examples of information that should be included in appraisals of art objects—paintings in particular—are found later under Qualified Appraisal. Amended 1040 Art valued at $20,000 or more. Amended 1040   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. Amended 1040 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. Amended 1040 Art valued at $50,000 or more. Amended 1040   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. Amended 1040 You must request the statement before filing the tax return that reports the donation. Amended 1040 Your request must include the following. Amended 1040 A copy of a qualified appraisal of the item. Amended 1040 See Qualified Appraisal, later. Amended 1040 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. Amended 1040 Add $250 for each item in excess of three. Amended 1040 A completed Form 8283, Section B. Amended 1040 The location of the IRS territory that has examination responsibility for your return. Amended 1040 If your request lacks essential information, you will be notified and given 30 days to provide the missing information. Amended 1040   Send your request to: Internal Revenue Service Attention: Art Appraisal (C:AP:ART) P. Amended 1040 O. Amended 1040 Box 27720 McPherson Station Washington, DC 20038 Refunds. Amended 1040   You can withdraw your request for a Statement of Value at any time before it is issued. Amended 1040 However, the IRS will not refund the user fee if you do. Amended 1040   If the IRS declines to issue a Statement of Value in the interest of efficient tax administration, the IRS will refund the user fee. Amended 1040 Authenticity. Amended 1040   The authenticity of the donated art must be determined by the appraiser. Amended 1040 Physical condition. Amended 1040   Important items in the valuation of antiques and art are physical condition and extent of restoration. Amended 1040 These have a significant effect on the value and must be fully reported in an appraisal. Amended 1040 An antique in damaged condition, or lacking the “original brasses,” may be worth much less than a similar piece in excellent condition. Amended 1040 Art appraisers. Amended 1040   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. Amended 1040 Certain art dealers or appraisers specialize, for example, in old masters, modern art, bronze sculpture, etc. Amended 1040 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. Amended 1040 They can report more recent comparable sales to support their opinion. Amended 1040   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. Amended 1040 It lists museums both by state and by category. Amended 1040   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. Amended 1040 The Yellow Pages often list specialized art and antique dealers, auctioneers, and art appraisers. Amended 1040 You may be able to find a qualified appraiser on the Internet. Amended 1040 You may also contact associations of dealers for guidance. Amended 1040 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. Amended 1040 Most common are rare books, autographs, sports memorabilia, dolls, manuscripts, stamps, coins, guns, phonograph records, and natural history items. Amended 1040 Many of the elements of valuation that apply to paintings and other objects of art, discussed earlier, also apply to miscellaneous collections. Amended 1040 Reference material. Amended 1040   Publications available to help you determine the value of many kinds of collections include catalogs, dealers' price lists, and specialized hobby periodicals. Amended 1040 When using one of these price guides, you must use the current edition at the date of contribution. Amended 1040 However, these sources are not always reliable indicators of FMV and should be supported by other evidence. Amended 1040   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. Amended 1040 The price an item sold for in an auction may have been the result of a rigged sale or a mere bidding duel. Amended 1040 The appraiser must analyze the reference material, and recognize and make adjustments for misleading entries. Amended 1040 If you are donating a valuable collection, you should get an appraisal. Amended 1040 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. Amended 1040 Stamp collections. Amended 1040   Most libraries have catalogs or other books that report the publisher's estimate of values. Amended 1040 Generally, two price levels are shown for each stamp: the price postmarked and the price not postmarked. Amended 1040 Stamp dealers generally know the value of their merchandise and are able to prepare satisfactory appraisals of valuable collections. Amended 1040 Coin collections. Amended 1040   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. Amended 1040 Like many other collectors' items, the value of a coin depends on the demand for it, its age, and its rarity. Amended 1040 Another important factor is the coin's condition. Amended 1040 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. Amended 1040   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. Amended 1040 Books. Amended 1040   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. Amended 1040 This is difficult to do and, except for a collection of little value, should be done by a specialized appraiser. Amended 1040 Within the general category of literary property, there are dealers who specialize in certain areas, such as Americana, foreign imports, Bibles, and scientific books. Amended 1040 Modest value of collection. Amended 1040   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. Amended 1040   A book that is very old, or very rare, is not necessarily valuable. Amended 1040 There are many books that are very old or rare, but that have little or no market value. Amended 1040 Condition of book. Amended 1040   The condition of a book may have a great influence on its value. Amended 1040 Collectors are interested in items that are in fine, or at least good, condition. Amended 1040 When a book has a missing page, a loose binding, tears, stains, or is otherwise in poor condition, its value is greatly lowered. Amended 1040 Other factors. Amended 1040   Some other factors in the valuation of a book are the kind of binding (leather, cloth, paper), page edges, and illustrations (drawings and photographs). Amended 1040 Collectors usually want first editions of books. Amended 1040 However, because of changes or additions, other editions are sometimes worth as much as, or more than, the first edition. Amended 1040 Manuscripts, autographs, diaries, and similar items. Amended 1040   When these items are handwritten, or at least signed by famous people, they are often in demand and are valuable. Amended 1040 The writings of unknowns also may be of value if they are of unusual historical or literary importance. Amended 1040 Determining the value of such material is difficult. Amended 1040 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. Amended 1040 The appraiser determines a value in these cases by applying knowledge and judgment to such factors as comparable sales and conditions. Amended 1040 Signatures. Amended 1040   Signatures, or sets of signatures, that were cut from letters or other papers usually have little or no value. Amended 1040 But complete sets of the signatures of U. Amended 1040 S. Amended 1040 presidents are in demand. Amended 1040 Cars, Boats, and Aircraft If you donate a car, a boat, or an aircraft to a charitable organization, its FMV must be determined. Amended 1040 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. Amended 1040 Prices are reported for each make, model, and year. Amended 1040 These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. Amended 1040 The prices are not “official,” and these publications are not considered an appraisal of any specific donated property. Amended 1040 But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. Amended 1040 These publications are sometimes available from public libraries or at a bank, credit union, or finance company. Amended 1040 You can also find pricing information about used cars on the Internet. Amended 1040 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. Amended 1040 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. Amended 1040 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. Amended 1040 Example. Amended 1040 You donate a used car in poor condition to a local high school for use by students studying car repair. Amended 1040 A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. Amended 1040 However, the guide shows the price for a private party sale of the car is only $750. Amended 1040 The FMV of the car is considered to be no more than $750. Amended 1040 Boats. Amended 1040   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. Amended 1040 More information. Amended 1040   Your deduction for a donated car, boat, or airplane generally is limited to the gross proceeds from its sale by the qualified organization. Amended 1040 This rule applies if the claimed value of the donated vehicle is more than $500. Amended 1040 In certain cases, you can deduct the vehicle's FMV. Amended 1040 For details, see Publication 526. Amended 1040 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. Amended 1040 For more information, see Publication 526. Amended 1040 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. Amended 1040 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. Amended 1040 Generally, this means your deduction is the lesser of the property's FMV or its basis. Amended 1040 For details, see Publication 526. Amended 1040 Stocks and Bonds The value of stocks and bonds is the FMV of a share or bond on the valuation date. Amended 1040 See Date of contribution, earlier, under What Is Fair Market Value (FMV). Amended 1040 Selling prices on valuation date. Amended 1040   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. Amended 1040 For example, if the highest selling price for a share was $11, and the lowest $9, the average price is $10. Amended 1040 You get the average price by adding $11 and $9 and dividing the sum by 2. Amended 1040 No sales on valuation date. Amended 1040   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. Amended 1040 Then you weight these averages in inverse order by the respective number of trading days between the selling dates and the valuation date. Amended 1040 Example. Amended 1040   On the day you gave stock to a qualified organization, there were no sales of the stock. Amended 1040 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. Amended 1040 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. Amended 1040   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. Amended 1040 This applies if these prices are published in a generally available listing or publication of general circulation. Amended 1040 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. Amended 1040 See also Unavailable prices or closely held corporation, later. Amended 1040 Bid and asked prices on valuation date. Amended 1040   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. Amended 1040 Example. Amended 1040 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. Amended 1040 The FMV is $15, the average price between the bid and asked prices. Amended 1040 No prices on valuation date. Amended 1040   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. Amended 1040 Both dates must be within a reasonable period. Amended 1040 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. Amended 1040 Example. Amended 1040 On the day you gave stock to a qualified organization, no prices were available. Amended 1040 Bona fide bid and asked prices 3 days before the valuation date were $10 and 2 days after the valuation date were $15. Amended 1040 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. Amended 1040   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. Amended 1040 Large blocks of stock. Amended 1040   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. Amended 1040 On the other hand, market forces may exist that will afford higher prices for large blocks of stock. Amended 1040 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. Amended 1040 Unavailable prices or closely held corporation. Amended 1040   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. Amended 1040 For bonds, the soundness of the security, the interest yield, the date of maturity, and other relevant factors. Amended 1040 For shares of stock, the company's net worth, prospective earning power and dividend-paying capacity, and other relevant factors. Amended 1040 Other factors. Amended 1040   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. Amended 1040 For preferred stock, the most important factors are its yield, dividend coverage, and protection of its liquidation preference. Amended 1040   You should keep complete financial and other information on which the valuation is based. Amended 1040 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. Amended 1040 Restricted securities. Amended 1040   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. Amended 1040 These restricted securities usually trade at a discount in relation to freely traded securities. Amended 1040   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. Amended 1040 Real Estate Because each piece of real estate is unique and its valuation is complicated, a detailed appraisal by a professional appraiser is necessary. Amended 1040 The appraiser must be thoroughly trained in the application of appraisal principles and theory. Amended 1040 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. Amended 1040 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. Amended 1040 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. Amended 1040 In general, there are three main approaches to the valuation of real estate. Amended 1040 An appraisal may require the combined use of two or three methods rather than one method only. Amended 1040 1. Amended 1040 Comparable Sales The comparable sales method compares the donated property with several similar properties that have been sold. Amended 1040 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. Amended 1040 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. Amended 1040 , Soil characteristics, vegetative cover, and status of mineral rights, and Other factors affecting value. Amended 1040 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. Amended 1040 The comparable selling prices must be adjusted to account for differences between the sale property and the donated property. Amended 1040 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. Amended 1040 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. Amended 1040 2. Amended 1040 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. Amended 1040 The key elements are the determination of the income to be capitalized and the rate of capitalization. Amended 1040 3. Amended 1040 Replacement Cost New or Reproduction Cost Minus Observed Depreciation This method, used alone, usually does not result in a determination of FMV. Amended 1040 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. Amended 1040 Of course, this reasoning does not apply if a similar property cannot be created because of location, unusual construction, or some other reason. Amended 1040 Generally, this method serves to support the value determined from other methods. Amended 1040 When the replacement cost method is applied to improved realty, the land and improvements are valued separately. Amended 1040 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. Amended 1040 This cost represents the total cost of labor and material, overhead, and profit. Amended 1040 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. Amended 1040 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. Amended 1040 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. Amended 1040 The value of the goodwill of the business should also be taken into consideration. Amended 1040 You should keep complete financial and other information on which you base the valuation. Amended 1040 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. Amended 1040 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. Amended 1040 The valuation of these commercial annuity contracts and of insurance policies is discussed later under Certain Life Insurance and Annuity Contracts. Amended 1040 To determine present value, you must know the applicable interest rate and use actuarial tables. Amended 1040 Interest rate. Amended 1040   The applicable interest rate varies. Amended 1040 It is announced monthly in a news release and published in the Internal Revenue Bulletin as a Revenue Ruling. Amended 1040 The interest rate to use is under the heading “Rate Under Section 7520” for a given month and year. Amended 1040 You can call the IRS office at 1-800-829-1040 to obtain this rate. Amended 1040 Actuarial tables. Amended 1040   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. Amended 1040   Use the valuation tables set forth in IRS Publications 1457, Actuarial Values (Book Aleph), and 1458, Actuarial Values (Book Beth). Amended 1040 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. Amended 1040 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. Amended 1040   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. Amended 1040 Publication 1458 contains the factors for valuing the remainder interest in a charitable remainder unitrust. Amended 1040 You can download Publications 1457 and 1458 from www. Amended 1040 irs. Amended 1040 gov. Amended 1040 In addition, they are available for purchase via the website of the U. Amended 1040 S. Amended 1040 Government Printing Office, by phone at (202) 512-1800, or by mail from the: Superintendent of Documents P. Amended 1040 O. Amended 1040 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. Amended 1040 642(c)-6(e)(6), transfers to charitable remainder unitrusts in Regulation 1. Amended 1040 664-4(e), and other transfers in Regulation 20. Amended 1040 2031-7(d)(6). Amended 1040 Special factors. Amended 1040   If you need a special factor for an actual transaction, you can request a letter ruling. Amended 1040 Be sure to include the date of birth of each person the duration of whose life may affect the value of the interest. Amended 1040 Also include copies of the relevant instruments. Amended 1040 IRS charges a user fee for providing special factors. Amended 1040   For more information about requesting a ruling, see Revenue Procedure 2006-1 (or annual update), 2006-1 I. Amended 1040 R. Amended 1040 B. Amended 1040 1. Amended 1040 Revenue Procedure 2006-1 is available at www. Amended 1040 irs. Amended 1040 gov/irb/2006-01_IRB/ar06. Amended 1040 html. Amended 1040   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. Amended 1040 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. Amended 1040 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. Amended 1040 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. Amended 1040 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. Amended 1040 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. Amended 1040 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. Amended 1040 To determine this value, you must know the FMV of the property on the date of the contribution. Amended 1040 Multiply this value by the appropriate factor. Amended 1040 Publications 1457 and 1458 contain these factors. Amended 1040 You must make an adjustment for depreciation or depletion using the factors shown in Publication 1459, Actuarial Values (Book Gimel). Amended 1040 You can use the factors for the month in which you made the contribution or for either of the two months preceding that month. Amended 1040 See the earlier discussion on Annuities, Interests for Life or Terms of Years, Remainders, and Reversions. Amended 1040 You can download Publication 1459 from www. Amended 1040 irs. Amended 1040 gov. Amended 1040 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. Amended 1040 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. Amended 1040 This rule also applies to a gift of a remainder interest that includes property that is part depletable and part not depletable. Amended 1040 Take into account depreciation or depletion only for the property that is subject to depreciation or depletion. Amended 1040 For more information, see section 1. Amended 1040 170A-12 of the Income Tax Regulations. Amended 1040 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. Amended 1040 It must extend over the entire term of your interest in the property. Amended 1040 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. Amended 1040 You can claim a deduction for the contribution if you do not have any other interest in the property. Amended 1040 To figure the value of a contribution involving a partial interest, see Publication 1457. Amended 1040 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. Amended 1040 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. Amended 1040 Qualified organization. Amended 1040   For purposes of a qualified conservation contribution, a qualified organization is: A governmental unit, A publicly supported charitable, religious, scientific, literary, educational, etc. Amended 1040 , organization, or An organization that is controlled by, and operated for the exclusive benefit of, a governmental unit or a publicly supported charity. Amended 1040 The organization also must have a commitment to protect the conservation purposes of the donation and must have the resources to enforce the restrictions. Amended 1040 Conservation purposes. Amended 1040   Your contribution must be made only for one of the following conservation purposes. Amended 1040 Preserving land areas for outdoor recreation by, or for the education of, the general public. Amended 1040 Protecting a relatively natural habitat of fish, wildlife, or plants, or a similar ecosystem. Amended 1040 Preserving open space, including farmland and forest land, if it yields a significant public benefit. Amended 1040 It must be either for the scenic enjoyment of the general public or under a clearly defined federal, state, or local governmental conservation policy. Amended 1040 Preserving a historically important land area or a certified historic structure. Amended 1040 There must be some visual public access to the property. Amended 1040 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. Amended 1040 Building in registered historic district. Amended 1040   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. Amended 1040 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. Amended 1040 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. Amended 1040 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. Amended 1040   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. Amended 1040 See Form 8283-V, Payment Voucher for Filing Fee Under Section 170(f)(13), and its instructions. Amended 1040 Qualified real property interest. Amended 1040   This is any of the following interests in real property. Amended 1040 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). Amended 1040 A remainder interest. Amended 1040 A restriction (granted in perpetuity) on the use that may be made of the real property. Amended 1040 Valuation. Amended 1040   A qualified real property interest described in (1) should be valued in a manner that is consistent with the type of interest transferred. Amended 1040 If you transferred all the interest in the property, the FMV of the property is the amount of the contribution. Amended 1040 If you do not transfer the mineral interest, the FMV of the surface rights in the property is the amount of the contribution. Amended 1040   If you owned only a remainder interest or an income interest (life estate), see Undivided Part of Your Entire Interest, earlier. Amended 1040 If you owned the entire property but transferred only a remainder interest (item (2)), see Remainder Interest in Real Property, earlier. Amended 1040   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. Amended 1040 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. Amended 1040   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. Amended 1040 You should also consider any zoning, conservation, or historical preservation laws that would restrict development. Amended 1040 Granting an easement may increase, rather than reduce, the value of property, and in such a situation no deduction would be allowed. Amended 1040 Example. Amended 1040   You own 10 acres of farmland. Amended 1040 Similar land in the area has an FMV of $2,000 an acre. Amended 1040 However, land in the general area that is restricted solely to farm use has an FMV of $1,500 an acre. Amended 1040 Your county wants to preserve open space and prevent further development in your area. Amended 1040   You grant to the county an enforceable open space easement in perpetuity on 8 of the 10 acres, restricting its use to farmland. Amended 1040 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. Amended 1040 More information. Amended 1040   For more information about qualified conservation contributions, see Publication 526. Amended 1040 Appraisals Appraisals are not necessary for items of property for which you claim a deduction of $5,000 or less. Amended 1040 (There is one exception, described next, for certain clothing and household items. Amended 1040 ) However, you generally will need an appraisal for donated property for which you claim a deduction of more than $5,000. Amended 1040 There are exceptions. Amended 1040 See Deductions of More Than $5,000, later. Amended 1040 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. Amended 1040 An appraisal must give all the facts on which to base an intelligent judgment of the value of the property. Amended 1040 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. Amended 1040 The appraiser's opinion is never more valid than the facts on which it is based; without these facts it is simply a guess. Amended 1040 The opinion of a person claiming to be an expert is not binding on the Internal Revenue Service. Amended 1040 All facts associated with the donation must be considered. Amended 1040 Deduction over $500 for certain clothing or household items. Amended 1040   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. Amended 1040 See Household Goods and Used Clothing, earlier. Amended 1040 Cost of appraisals. Amended 1040   You may not take a charitable contribution deduction for fees you pay for appraisals of your donated property. Amended 1040 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. Amended 1040 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. Amended 1040 There are exceptions, discussed later. Amended 1040 You should keep the appraiser's report with your written records. Amended 1040 Records are discussed in Publication 526. Amended 1040 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. Amended 1040 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. Amended 1040 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. Amended 1040 Exceptions. Amended 1040   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. Amended 1040   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. Amended 1040 Publicly traded securities. Amended 1040   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. Amended 1040 Publicly traded securities that meet these requirements must be reported on Form 8283, Section A. Amended 1040   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. Amended 1040   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. Amended 1040 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. Amended 1040   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. Amended 1040 Bid and asked quotations are not taken into account. Amended 1040   The computation period is weekly during October through December and monthly during January through September. Amended 1040 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. Amended 1040 Nonpublicly traded stock. Amended 1040   If you contribute nonpublicly traded stock, for which you claim a deduction of $10,000 or less, a qualified appraisal is not required. Amended 1040 However, you must attach Form 8283 to your tax return, with Section B, Parts I and IV, completed. Amended 1040 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. Amended 1040 This does not apply to contributions of cash, inventory, publicly traded stock, or intellectual property. Amended 1040 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. Amended 1040 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. Amended 1040 You must also complete Form 8283, Section B, and attach it to your tax return. Amended 1040 See Deductions of More Than $5,000, earlier. Amended 1040 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. Amended 1040 170A-13(c)(3) and Notice 2006-96, 2006-46 I. Amended 1040 R. Amended 1040 B. Amended 1040 902 (available at www. Amended 1040 irs. Amended 1040 gov/irb/2006-46_IRB/ar13. Amended 1040 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). Amended 1040 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. Amended 1040 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. Amended 1040 Form 8283, Section B, must be attached to your tax return. Amended 1040 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. Amended 1040 There are four exceptions. Amended 1040 If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the appraisal. Amended 1040 See Paintings, Antiques, and Other Objects of Art, earlier. Amended 1040 If you claim a deduction of more than $500,000 for a donation of property, you must attach the appraisal. Amended 1040 See Deductions of More Than $500,000, earlier. Amended 1040 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. Amended 1040 See Deduction over $500 for certain clothing or household items, earlier. Amended 1040 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. Amended 1040 See Building in registered historic district, earlier. Amended 1040 Prohibited appraisal fee. Amended 1040   Generally, no part of the fee arrangement for a qualified appraisal can be based on a percentage of the appraised value of the property. Amended 1040 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. Amended 1040 However, appraisals are not disqualified when an otherwise prohi