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Free File Form 4868

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Free File Form 4868

Free file form 4868 4. Free file form 4868   Reporting Gains and Losses Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Information Returns Schedule D and Form 8949Long and Short Term Net Gain or Loss Treatment of Capital Losses Capital Gains Tax Rates Form 4797Mark-to-market election. Free file form 4868 Introduction This chapter explains how to report capital gains and losses and ordinary gains and losses from sales, exchanges, and other dispositions of property. Free file form 4868 Although this discussion refers to Schedule D (Form 1040) and Form 8949, many of the rules discussed here also apply to taxpayers other than individuals. Free file form 4868 However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. Free file form 4868 Topics - This chapter discusses: Information returns Schedule D (Form 1040) Form 4797 Form 8949 Useful Items - You may want to see: Publication 550 Investment Income and Expenses 537 Installment Sales Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 1099-B Proceeds From Broker and Barter Exchange Transactions 1099-S Proceeds From Real Estate Transactions 4684 Casualties and Thefts 4797 Sales of Business Property 6252 Installment Sale Income 6781 Gains and Losses from Section 1256 Contracts and Straddles 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets See chapter 5 for information about getting publications and forms. Free file form 4868 Information Returns If you sell or exchange certain assets, you should receive an information return showing the proceeds of the sale. Free file form 4868 This information is also provided to the IRS. Free file form 4868 Form 1099-B. Free file form 4868   If you sold property, such as stocks, bonds, or certain commodities, through a broker, you should receive Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a substitute statement from the broker. Free file form 4868 Use the Form 1099-B or a substitute statement to complete Form 8949 and/or Schedule D. Free file form 4868 Whether or not you receive 1099-B, you must report all taxable sales of stock, bonds, commodities, etc. Free file form 4868 on Form 8949 and/or Schedule D, as applicable. Free file form 4868 For more information on figuring gains and losses from these transactions, see chapter 4 in Publication 550. Free file form 4868 For information on reporting the gains and losses, see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Free file form 4868 Form 1099-S. Free file form 4868   An information return must be provided on certain real estate transactions. Free file form 4868 Generally, the person responsible for closing the transaction (the “real estate reporting person”) must report on Form 1099-S sales or exchanges of the following types of property. Free file form 4868 Land (improved or unimproved), including air space. Free file form 4868 An inherently permanent structure, including any residential, commercial, or industrial building. Free file form 4868 A condominium unit and its related fixtures and common elements (including land). Free file form 4868 Stock in a cooperative housing corporation. Free file form 4868 If you sold or exchanged any of the above types of property, the “real estate reporting person” must give you a copy of Form 1099-S or a statement containing the same information as the Form 1099-S. Free file form 4868 The “real estate reporting person” could include the buyer's attorney, your attorney, the title or escrow company, a mortgage lender, your broker, the buyer's broker, or the person acquiring the biggest interest in the property. Free file form 4868   For more information see chapter 4 in Publication 550. Free file form 4868 Also, see the Instructions for Form 8949. Free file form 4868 Schedule D and Form 8949 Form 8949. Free file form 4868   Individuals, corporations, and partnerships, use Form 8949 to report the following. Free file form 4868    Sales or exchanges of capital assets, including stocks, bonds, etc. Free file form 4868 , and real estate (if not reported on another form or schedule such as Form 4684, 4797, 6252, 6781, or 8824). Free file form 4868 Include these transactions even if you did not receive a Form 1099-B or 1099-S. Free file form 4868 Gains from involuntary conversions (other than from casualty or theft) of capital assets not held for business or profit. Free file form 4868 Nonbusiness bad debts. Free file form 4868   Individuals, If you are filing a joint return, complete as many copies of Form 8949 as you need to report all of your and your spouse's transactions. Free file form 4868 You and your spouse may list your transactions on separate forms or you may combine them. Free file form 4868 However, you must include on your Schedule D the totals from all Forms 8949 for both you and your spouse. Free file form 4868    Corporations and electing large partnerships also use Form 8949 to report their share of gain or loss from a partnership, S Corporation, estate or trust. Free file form 4868   Business entities meeting certain criteria, may have an exception to some of the normal requirements for completing Form 8949. Free file form 4868 See the Instructions for Form 8949. Free file form 4868 Schedule D. Free file form 4868    Use Schedule D (Form 1040) to figure the overall gain or loss from transactions reported on Form 8949, and to report certain transactions you do not have to report on Form 8949. Free file form 4868 Before completing Schedule D, you may have to complete other forms as shown below. Free file form 4868    Complete all applicable lines of Form 8949 before completing lines 1b, 2, 3, 8b, 9, or 10 of your applicable Schedule D. Free file form 4868 Enter on Schedule D the combined totals from all your Forms 8949. Free file form 4868 For a sale, exchange, or involuntary conversion of business property, complete Form 4797 (discussed later). Free file form 4868 For a like-kind exchange, complete Form 8824. Free file form 4868 See Reporting the exchange under Like-Kind Exchanges in chapter 1. Free file form 4868 For an installment sale, complete Form 6252. Free file form 4868 See Publication 537. Free file form 4868 For an involuntary conversion due to casualty or theft, complete Form 4684. Free file form 4868 See Publication 547, Casualties, Disasters, and Thefts. Free file form 4868 For a disposition of an interest in, or property used in, an activity to which the at-risk rules apply, complete Form 6198, At-Risk Limitations. Free file form 4868 See Publication 925, Passive Activity and At-Risk Rules. Free file form 4868 For a disposition of an interest in, or property used in, a passive activity, complete Form 8582, Passive Activity Loss Limitations. Free file form 4868 See Publication 925. Free file form 4868 For gains and losses from section 1256 contracts and straddles, complete Form 6781. Free file form 4868 See Publication 550. Free file form 4868 Personal-use property. Free file form 4868   Report gain on the sale or exchange of property held for personal use (such as your home) on Form 8949 and Schedule D (Form 1040), as applicable. Free file form 4868 Loss from the sale or exchange of property held for personal use is not deductible. Free file form 4868 But if you had a loss from the sale or exchange of real estate held for personal use for which you received a Form 1099-S, report the transaction on Form 8949 and Schedule D, even though the loss is not deductible. Free file form 4868 See the Instructions for Schedule D (Form 1040) and the Instructions for Form 8949 for information on how to report the transaction. Free file form 4868 Long and Short Term Where you report a capital gain or loss depends on how long you own the asset before you sell or exchange it. Free file form 4868 The time you own an asset before disposing of it is the holding period. Free file form 4868 If you received a Form 1099-B, (or substitute statement) box 1c may help you determine whether the gain or loss is short-term or long-term. Free file form 4868 If you hold a capital asset 1 year or less, the gain or loss from its disposition is short term. Free file form 4868 Report it in Part I of Form 8949 and/or Schedule D, as applicable. Free file form 4868 If you hold a capital asset longer than 1 year, the gain or loss from its disposition is long term. Free file form 4868 Report it in Part II of Form 8949 and/or Schedule D, as applicable. Free file form 4868   Table 4-1. Free file form 4868 Do I Have a Short-Term or Long-Term Gain or Loss? IF you hold the property. Free file form 4868 . Free file form 4868 . Free file form 4868  THEN you have a. Free file form 4868 . Free file form 4868 . Free file form 4868 1 year or less, Short-term capital gain or  loss. Free file form 4868 More than 1 year, Long-term capital gain or  loss. Free file form 4868 These distinctions are essential to correctly arrive at your net capital gain or loss. Free file form 4868 Capital losses are allowed in full against capital gains plus up to $3,000 of ordinary income. Free file form 4868 See Capital Gains Tax Rates, later. Free file form 4868 Holding period. Free file form 4868   To figure if you held property longer than 1 year, start counting on the day following the day you acquired the property. Free file form 4868 The day you disposed of the property is part of your holding period. Free file form 4868 Example. Free file form 4868 If you bought an asset on June 19, 2012, you should start counting on June 20, 2012. Free file form 4868 If you sold the asset on June 19, 2013, your holding period is not longer than 1 year, but if you sold it on June 20, 2013, your holding period is longer than 1 year. Free file form 4868 Patent property. Free file form 4868   If you dispose of patent property, you generally are considered to have held the property longer than 1 year, no matter how long you actually held it. Free file form 4868 For more information, see Patents in chapter 2. Free file form 4868 Inherited property. Free file form 4868   If you inherit property, you are considered to have held the property longer than 1 year, regardless of how long you actually held it. Free file form 4868 Installment sale. Free file form 4868   The gain from an installment sale of an asset qualifying for long-term capital gain treatment in the year of sale continues to be long term in later tax years. Free file form 4868 If it is short term in the year of sale, it continues to be short term when payments are received in later tax years. Free file form 4868    The date the installment payment is received determines the capital gains rate that should be applied not the date the asset was sold under an installment contract. Free file form 4868 Nontaxable exchange. Free file form 4868   If you acquire an asset in exchange for another asset and your basis for the new asset is figured, in whole or in part, by using your basis in the old property, the holding period of the new property includes the holding period of the old property. Free file form 4868 That is, it begins on the same day as your holding period for the old property. Free file form 4868 Example. Free file form 4868 You bought machinery on December 4, 2012. Free file form 4868 On June 4, 2013, you traded this machinery for other machinery in a nontaxable exchange. Free file form 4868 On December 5, 2013, you sold the machinery you got in the exchange. Free file form 4868 Your holding period for this machinery began on December 5, 2012. Free file form 4868 Therefore, you held it longer than 1 year. Free file form 4868 Corporate liquidation. Free file form 4868   The holding period for property you receive in a liquidation generally starts on the day after you receive it if gain or loss is recognized. Free file form 4868 Profit-sharing plan. Free file form 4868   The holding period of common stock withdrawn from a qualified contributory profit-sharing plan begins on the day following the day the plan trustee delivered the stock to the transfer agent with instructions to reissue the stock in your name. Free file form 4868 Gift. Free file form 4868   If you receive a gift of property and your basis in it is figured using the donor's basis, your holding period includes the donor's holding period. Free file form 4868 For more information on basis, see Publication 551, Basis of Assets. Free file form 4868 Real property. Free file form 4868   To figure how long you held real property, start counting on the day after you received title to it or, if earlier, the day after you took possession of it and assumed the burdens and privileges of ownership. Free file form 4868   However, taking possession of real property under an option agreement is not enough to start the holding period. Free file form 4868 The holding period cannot start until there is an actual contract of sale. Free file form 4868 The holding period of the seller cannot end before that time. Free file form 4868 Repossession. Free file form 4868   If you sell real property but keep a security interest in it and then later repossess it, your holding period for a later sale includes the period you held the property before the original sale, as well as the period after the repossession. Free file form 4868 Your holding period does not include the time between the original sale and the repossession. Free file form 4868 That is, it does not include the period during which the first buyer held the property. Free file form 4868 Nonbusiness bad debts. Free file form 4868   Nonbusiness bad debts are short-term capital losses. Free file form 4868 For information on nonbusiness bad debts, see chapter 4 of Publication 550. Free file form 4868    Net Gain or Loss The totals for short-term capital gains and losses and the totals for long-term capital gains and losses must be figured separately. Free file form 4868 Net short-term capital gain or loss. Free file form 4868   Combine your short-term capital gains and losses, including your share of short-term capital gains or losses from partnerships, S corporations, and fiduciaries and any short-term capital loss carryover. Free file form 4868 Do this by adding all your short-term capital gains. Free file form 4868 Then add all your short-term capital losses. Free file form 4868 Subtract the lesser total from the other. Free file form 4868 The result is your net short-term capital gain or loss. Free file form 4868 Net long-term capital gain or loss. Free file form 4868   Follow the same steps to combine your long-term capital gains and losses. Free file form 4868 Include the following items. Free file form 4868 Net section 1231 gain from Part I, Form 4797, after any adjustment for nonrecaptured section 1231 losses from prior tax years. Free file form 4868 Capital gain distributions from regulated investment companies (mutual funds) and real estate investment trusts. Free file form 4868 Your share of long-term capital gains or losses from partnerships, S corporations, and fiduciaries. Free file form 4868 Any long-term capital loss carryover. Free file form 4868 The result from combining these items with other long-term capital gains and losses is your net long-term capital gain or loss. Free file form 4868 Net gain. Free file form 4868   If the total of your capital gains is more than the total of your capital losses, the difference is taxable. Free file form 4868 Different tax rates may apply to the part that is a net capital gain. Free file form 4868 See Capital Gains Tax Rates, later. Free file form 4868 Net loss. Free file form 4868   If the total of your capital losses is more than the total of your capital gains, the difference is deductible. Free file form 4868 But there are limits on how much loss you can deduct and when you can deduct it. Free file form 4868 See Treatment of Capital Losses, next. Free file form 4868    Treatment of Capital Losses If your capital losses are more than your capital gains, you can deduct the difference as a capital loss deduction even if you do not have ordinary income to offset it. Free file form 4868 The yearly limit on the amount of the capital loss you can deduct is $3,000 ($1,500 if you are married and file a separate return). Free file form 4868 Table 4-2. Free file form 4868 Holding Period for Different Types of Acquisitions Type of acquisition: When your holding period starts: Stocks and bonds bought on a securities market Day after trading date you bought security. Free file form 4868 Ends on trading date you sold security. Free file form 4868 U. Free file form 4868 S. Free file form 4868 Treasury notes and bonds If bought at auction, day after notification of bid acceptance. Free file form 4868 If bought through subscription, day after subscription was submitted. Free file form 4868 Nontaxable exchanges Day after date you acquired old property. Free file form 4868 Gift If your basis is giver's adjusted basis, same day as giver's holding period began. Free file form 4868 If your basis is FMV, day after date of gift. Free file form 4868 Real property bought Generally, day after date you received title to the property. Free file form 4868 Real property repossessed Day after date you originally received title to the property, but does not include time between the original sale and date of repossession. Free file form 4868 Capital loss carryover. Free file form 4868   Generally, you have a capital loss carryover if either of the following situations applies to you. Free file form 4868 Your net loss is more than the yearly limit. Free file form 4868 Your taxable income without your deduction for exemptions is less than zero. Free file form 4868 If either of these situations applies to you for 2013, see Capital Losses under Reporting Capital Gains and Losses in chapter 4 of Publication 550 to figure the amount you can carryover to 2014. Free file form 4868 Example. Free file form 4868 Bob and Gloria Sampson sold property in 2013. Free file form 4868 The sale resulted in a capital loss of $7,000. Free file form 4868 The Sampsons had no other capital transactions. Free file form 4868 On their joint 2013 return, the Sampsons deduct $3,000, the yearly limit. Free file form 4868 They had taxable income of $2,000. Free file form 4868 The unused part of the loss, $4,000 ($7,000 − $3,000), is carried over to 2014. Free file form 4868 If the Sampsons' capital loss had been $2,000, it would not have been more than the yearly limit. Free file form 4868 Their capital loss deduction would have been $2,000. Free file form 4868 They would have no carryover to 2014. Free file form 4868 Short-term and long-term losses. Free file form 4868   When you carry over a loss, it retains its original character as either long term or short term. Free file form 4868 A short-term loss you carry over to the next tax year is added to short-term losses occurring in that year. Free file form 4868 A long-term loss you carry over to the next tax year is added to long-term losses occurring in that year. Free file form 4868 A long-term capital loss you carry over to the next year reduces that year's long-term gains before its short-term gains. Free file form 4868   If you have both short-term and long-term losses, your short-term losses are used first against your allowable capital loss deduction. Free file form 4868 If, after using your short-term losses, you have not reached the limit on the capital loss deduction, use your long-term losses until you reach the limit. Free file form 4868 To figure your capital loss carryover from 2013 to 2014 use the Capital Loss Carryover Worksheet in the 2013 Instructions for Schedule D (Form 1040). Free file form 4868 Joint and separate returns. Free file form 4868   On a joint return, the capital gains and losses of spouses are figured as the gains and losses of an individual. Free file form 4868 If you are married and filing a separate return, your yearly capital loss deduction is limited to $1,500. Free file form 4868 Neither you nor your spouse can deduct any part of the other's loss. Free file form 4868   If you and your spouse once filed separate returns and are now filing a joint return, combine your separate capital loss carryovers. Free file form 4868 However, if you and your spouse once filed jointly and are now filing separately, any capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss. Free file form 4868 Death of taxpayer. Free file form 4868   Capital losses cannot be carried over after a taxpayer's death. Free file form 4868 They are deductible only on the final income tax return filed on the decedent's behalf. Free file form 4868 The yearly limit discussed earlier still applies in this situation. Free file form 4868 Even if the loss is greater than the limit, the decedent's estate cannot deduct the difference or carry it over to following years. Free file form 4868 Corporations. Free file form 4868   A corporation can deduct capital losses only up to the amount of its capital gains. Free file form 4868 In other words, if a corporation has a net capital loss, it cannot be deducted in the current tax year. Free file form 4868 It must be carried to other tax years and deducted from capital gains occurring in those years. Free file form 4868 For more information, see Publication 542. Free file form 4868 Capital Gains Tax Rates The tax rates that apply to a net capital gain are generally lower than the tax rates that apply to other income. Free file form 4868 These lower rates are called the maximum capital gains rates. Free file form 4868 The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. Free file form 4868 For 2013, the maximum tax rates for individuals are 0%, 15%, 20%, 25%, and 28%. Free file form 4868 Also, individuals, use the Qualified Dividends and Capital Gain Worksheet in the Instructions for Form 1040, or the Schedule D Tax Computation Worksheet in the Instructions for Schedule D (Form 1040) (whichever applies) to figure your tax if you have qualified dividends or net capital gain. Free file form 4868 For more information, see chapter 4 of Publication 550. Free file form 4868 Also see the Instructions for Schedule D (Form 1040). Free file form 4868 Unrecaptured section 1250 gain. Free file form 4868   Generally, this is the part of any long-term capital gain on section 1250 property (real property) that is due to depreciation. Free file form 4868 Unrecaptured section 1250 gain cannot be more than the net section 1231 gain or include any gain otherwise treated as ordinary income. Free file form 4868 Use the worksheet in the Schedule D instructions to figure your unrecaptured section 1250 gain. Free file form 4868 For more information about section 1250 property and net section 1231 gain, see chapter 3. Free file form 4868 Form 4797 Use Form 4797 to report: The sale or exchange of: Property used in your trade or business; Depreciable and amortizable property; Oil, gas, geothermal, or other mineral properties; and Section 126 property. Free file form 4868 The involuntary conversion (from other than casualty or theft) of property used in your trade or business and capital assets held in connection with a trade or business or a transaction entered into for profit. Free file form 4868 The disposition of noncapital assets (other than inventory or property held primarily for sale to customers in the ordinary course of your trade or business). Free file form 4868 The disposition of capital assets not reported on Schedule D. Free file form 4868 The gain or loss (including any related recapture) for partners and S corporation shareholders from certain section 179 property dispositions by partnerships (other than electing large partnerships) and S corporations. Free file form 4868 The computation of recapture amounts under sections 179 and 280F(b)(2) when the business use of section 179 or listed property decreases to 50% or less. Free file form 4868 Gains or losses treated as ordinary gains or losses, if you are a trader in securities or commodities and made a mark-to-market election under Internal Revenue Code section 475(f). Free file form 4868 You can use Form 4797 with Form 1040, 1065, 1120, or 1120S. Free file form 4868 Section 1231 gains and losses. Free file form 4868   Show any section 1231 gains and losses in Part I. Free file form 4868 Carry a net gain to Schedule D (Form 1040) as a long-term capital gain. Free file form 4868 Carry a net loss to Part II of Form 4797 as an ordinary loss. Free file form 4868   If you had any nonrecaptured net section 1231 losses from the preceding 5 tax years, reduce your net gain by those losses and report the amount of the reduction as an ordinary gain in Part II. Free file form 4868 Report any remaining gain on Schedule D (Form 1040). Free file form 4868 See Section 1231 Gains and Losses in chapter 3. Free file form 4868 Ordinary gains and losses. Free file form 4868   Show any ordinary gains and losses in Part II. Free file form 4868 This includes a net loss or a recapture of losses from prior years figured in Part I of Form 4797. Free file form 4868 It also includes ordinary gain figured in Part III. Free file form 4868 Mark-to-market election. Free file form 4868   If you made a mark-to-market election, you should report all gains and losses from trading as ordinary gains and losses in Part II of Form 4797, instead of as capital gains and losses on Form 8949 and Schedule D (Form 1040). Free file form 4868 See the Instructions for Form 4797. Free file form 4868 Also see Special Rules for Traders in Securities, in chapter 4 of Publication 550. Free file form 4868 Ordinary income from depreciation. Free file form 4868   Figure the ordinary income from depreciation on personal property and additional depreciation on real property (as discussed in chapter 3) in Part III. Free file form 4868 Carry the ordinary income to Part II of Form 4797 as an ordinary gain. Free file form 4868 Carry any remaining gain to Part I as section 1231 gain, unless it is from a casualty or theft. Free file form 4868 Carry any remaining gain from a casualty or theft to Form 4684. Free file form 4868 Prev  Up  Next   Home   More Online Publications
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Fiscal Year 2013 Enforcement and Service Results

The Fiscal Year 2013 Enforcement and Service Results tables provide details about IRS audit, collection and taxpayer service. Fiscal Year 2013 began on Oct. 1, 2012, and ended on Sept. 30, 2013.

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The Free File Form 4868

Free file form 4868 Publication 561 - Main Contents Table of Contents What Is Fair Market Value (FMV)?Factors. Free file form 4868 Stock. Free file form 4868 Options. Free file form 4868 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). Free file form 4868 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. Free file form 4868 Fair market value. Free file form 4868   Fair market value (FMV) is the price that property would sell for on the open market. Free file form 4868 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. Free file form 4868 If you put a restriction on the use of property you donate, the FMV must reflect that restriction. Free file form 4868 Example 1. Free file form 4868 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. Free file form 4868 Usually, such items are worth far less than what you paid for them. Free file form 4868 Example 2. Free file form 4868 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. Free file form 4868 Factors. Free file form 4868   In making and supporting the valuation of property, all factors affecting value are relevant and must be considered. Free file form 4868 These include: The cost or selling price of the item, Sales of comparable properties, Replacement cost, and Opinions of experts. Free file form 4868   These factors are discussed later. Free file form 4868 Also, see Table 1 for a summary of questions to ask as you consider each factor. Free file form 4868 Date of contribution. Free file form 4868   Ordinarily, the date of a contribution is the date that the transfer of the property takes place. Free file form 4868 Stock. Free file form 4868   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. Free file form 4868 If the certificate is mailed and received through the regular mail, it is the date of mailing. Free file form 4868 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. Free file form 4868 Options. Free file form 4868   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. Free file form 4868 The amount of the contribution is the FMV of the property on the date the option is exercised minus the exercise price. Free file form 4868 Example. Free file form 4868 You grant an option to a local university, which is a qualified organization, to buy real property. Free file form 4868 Under the option, the university could buy the property at any time during a 2-year period for $40,000. Free file form 4868 The FMV of the property on the date the option is granted is $50,000. Free file form 4868 In the following tax year, the university exercises the option. Free file form 4868 The FMV of the property on the date the option is exercised is $55,000. Free file form 4868 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. Free file form 4868 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. Free file form 4868 Usually it is not that simple. Free file form 4868 Using such formulas, etc. Free file form 4868 , seldom results in an acceptable determination of FMV. Free file form 4868 There is no single formula that always applies when determining the value of property. Free file form 4868 This is not to say that a valuation is only guesswork. Free file form 4868 You must consider all the facts and circumstances connected with the property, such as its desirability, use, and scarcity. Free file form 4868 For example, donated furniture should not be evaluated at some fixed rate such as 15% of the cost of new replacement furniture. Free file form 4868 When the furniture is contributed, it may be out of style or in poor condition, therefore having little or no market value. Free file form 4868 On the other hand, it may be an antique, the value of which could not be determined by using any formula. Free file form 4868 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. Free file form 4868 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. Free file form 4868 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. Free file form 4868 Example. Free file form 4868 Tom Morgan, who is not a dealer in gems, bought an assortment of gems for $5,000 from a promoter. Free file form 4868 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. Free file form 4868 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. Free file form 4868 Tom gave the gems to a qualified charity 13 months after buying them. Free file form 4868 The selling price for these gems had not changed from the date of purchase to the date he donated them to charity. Free file form 4868 The best evidence of FMV depends on actual transactions and not on some artificial estimate. Free file form 4868 The $5,000 charged Tom and others is, therefore, the best evidence of the maximum FMV of the gems. Free file form 4868 Terms of the purchase or sale. Free file form 4868   The terms of the purchase or sale should be considered in determining FMV if they influenced the price. Free file form 4868 These terms include any restrictions, understandings, or covenants limiting the use or disposition of the property. Free file form 4868 Rate of increase or decrease in value. Free file form 4868   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. Free file form 4868 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. Free file form 4868 Example. Free file form 4868 Bill Brown bought a painting for $10,000. Free file form 4868 Thirteen months later he gave it to an art museum, claiming a charitable deduction of $15,000 on his tax return. Free file form 4868 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. Free file form 4868 Arm's-length offer. Free file form 4868   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. Free file form 4868 To rely on an offer, you should be able to show proof of the offer and the specific amount to be paid. Free file form 4868 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. Free file form 4868 Sales of Comparable Properties The sales prices of properties similar to the donated property are often important in determining the FMV. Free file form 4868 The weight to be given to each sale depends on the following. Free file form 4868 The degree of similarity between the property sold and the donated property. Free file form 4868 The time of the sale—whether it was close to the valuation date. Free file form 4868 The circumstances of the sale—whether it was at arm's-length with a knowledgeable buyer and seller, with neither having to act. Free file form 4868 The conditions of the market in which the sale was made—whether unusually inflated or deflated. Free file form 4868 The comparable sales method of valuing real estate is explained later under Valuation of Various Kinds of Property. Free file form 4868 Example 1. Free file form 4868 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. Free file form 4868 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. Free file form 4868 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. Free file form 4868 Thirteen months later she gave all the Bibles to a church that she selected from a list provided by the promoter. Free file form 4868 At the time of her donation, wholesale dealers were selling similar quantities of Bibles to the general public for $10,000. Free file form 4868 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. Free file form 4868 Example 2. Free file form 4868 The facts are the same as in Example 1, except that the promoter gave Mary Black a second option. Free file form 4868 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. Free file form 4868 The principal and interest on the note would not be due for 12 years. Free file form 4868 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. Free file form 4868 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. Free file form 4868 At the time of the gift, the promoter was selling similar lots of Bibles for either $10,000 or $30,000. Free file form 4868 The difference between the two prices was solely at the discretion of the buyer. Free file form 4868 The promoter was a willing seller for $10,000. Free file form 4868 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. Free file form 4868 Replacement Cost The cost of buying, building, or manufacturing property similar to the donated item should be considered in determining FMV. Free file form 4868 However, there must be a reasonable relationship between the replacement cost and the FMV. Free file form 4868 The replacement cost is the amount it would cost to replace the donated item on the valuation date. Free file form 4868 Often there is no relationship between the replacement cost and the FMV. Free file form 4868 If the supply of the donated property is more or less than the demand for it, the replacement cost becomes less important. Free file form 4868 To determine the replacement cost of the donated property, find the “estimated replacement cost new. Free file form 4868 ” Then subtract from this figure an amount for depreciation due to the physical condition and obsolescence of the donated property. Free file form 4868 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. Free file form 4868 ” 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. Free file form 4868 For an expert's opinion to deserve much weight, the facts must support the opinion. Free file form 4868 For additional information, see Appraisals, later. Free file form 4868 Table 1. Free file form 4868 Factors That Affect FMV IF the factor you are considering is. Free file form 4868 . Free file form 4868 . Free file form 4868 THEN you should ask these questions. Free file form 4868 . Free file form 4868 . Free file form 4868     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. Free file form 4868 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. Free file form 4868 When you rely on sales of comparable property, the sales must have been made in an open market. Free file form 4868 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. Free file form 4868 For example, liquidation sale prices usually do not indicate the FMV. Free file form 4868 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. Free file form 4868 Selection of Comparable Sales Using sales of comparable property is an important method for determining the FMV of donated property. Free file form 4868 However, the amount of weight given to a sale depends on the degree of similarity between the comparable and the donated properties. Free file form 4868 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. Free file form 4868 Example. Free file form 4868 You give a rare, old book to your former college. Free file form 4868 The book is a third edition and is in poor condition because of a missing back cover. Free file form 4868 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. Free file form 4868 Although the contents are the same, the books are not at all similar because of the different editions and their physical condition. Free file form 4868 Little consideration would be given to the selling price of the $300 property by knowledgeable buyers or sellers. Free file form 4868 Future Events You may not consider unexpected events happening after your donation of property in making the valuation. Free file form 4868 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. Free file form 4868 Example. Free file form 4868 You give farmland to a qualified charity. Free file form 4868 The transfer provides that your mother will have the right to all income and full use of the property for her life. Free file form 4868 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. Free file form 4868 You may not take a higher deduction because the charity received full use and possession of the land only 1 week after the transfer. Free file form 4868 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. Free file form 4868 Example. Free file form 4868 You give all your rights in a successful patent to your favorite charity. Free file form 4868 Your records show that before the valuation date there were three stages in the patent's history of earnings. Free file form 4868 First, there was rapid growth in earnings when the invention was introduced. Free file form 4868 Then, there was a period of high earnings when the invention was being exploited. Free file form 4868 Finally, there was a decline in earnings when competing inventions were introduced. Free file form 4868 The entire history of earnings may be relevant in estimating the future earnings. Free file form 4868 However, the appraiser must not rely too much on the stage of rapid growth in earnings, or of high earnings. Free file form 4868 The market conditions at those times do not represent the condition of the market at the valuation date. Free file form 4868 What is most significant is the trend of decline in earnings up to the valuation date. Free file form 4868 For more information about donations of patents, see Patents, later. Free file form 4868 Valuation of Various Kinds of Property This section contains information on determining the FMV of ordinary kinds of donated property. Free file form 4868 For information on appraisals, see Appraisals, later. Free file form 4868 Household Goods The FMV of used household goods, such as furniture, appliances, and linens, is usually much lower than the price paid when new. Free file form 4868 Such used property may have little or no market value because of its worn condition. Free file form 4868 It may be out of style or no longer useful. Free file form 4868 You cannot take a deduction for household goods donated after August 17, 2006, unless they are in good used condition or better. Free file form 4868 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. Free file form 4868 See Deduction over $500 for certain clothing or household items, later. Free file form 4868 If the property is valuable because it is old or unique, see the discussion under Paintings, Antiques, and Other Objects of Art. Free file form 4868 Used Clothing Used clothing and other personal items are usually worth far less than the price you paid for them. Free file form 4868 Valuation of items of clothing does not lend itself to fixed formulas or methods. Free file form 4868 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. Free file form 4868 You cannot take a deduction for clothing donated after August 17, 2006, unless it is in good used condition or better. Free file form 4868 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. Free file form 4868 See Deduction over $500 for certain clothing or household items, later. Free file form 4868 For valuable furs or very expensive gowns, a Form 8283 may have to be sent with your tax return. Free file form 4868 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. Free file form 4868 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. Free file form 4868 If not in fashion, the possibility of having the property redesigned, recut, or reset should be reported in the appraisal. Free file form 4868 The stone's coloring, weight, cut, brilliance, and flaws should be reported and analyzed. Free file form 4868 Sentimental personal value has no effect on FMV. Free file form 4868 But if the jewelry was owned by a famous person, its value might increase. Free file form 4868 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. Free file form 4868 Examples of information that should be included in appraisals of art objects—paintings in particular—are found later under Qualified Appraisal. Free file form 4868 Art valued at $20,000 or more. Free file form 4868   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. Free file form 4868 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. Free file form 4868 Art valued at $50,000 or more. Free file form 4868   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. Free file form 4868 You must request the statement before filing the tax return that reports the donation. Free file form 4868 Your request must include the following. Free file form 4868 A copy of a qualified appraisal of the item. Free file form 4868 See Qualified Appraisal, later. Free file form 4868 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. Free file form 4868 Add $250 for each item in excess of three. Free file form 4868 A completed Form 8283, Section B. Free file form 4868 The location of the IRS territory that has examination responsibility for your return. Free file form 4868 If your request lacks essential information, you will be notified and given 30 days to provide the missing information. Free file form 4868   Send your request to: Internal Revenue Service Attention: Art Appraisal (C:AP:ART) P. Free file form 4868 O. Free file form 4868 Box 27720 McPherson Station Washington, DC 20038 Refunds. Free file form 4868   You can withdraw your request for a Statement of Value at any time before it is issued. Free file form 4868 However, the IRS will not refund the user fee if you do. Free file form 4868   If the IRS declines to issue a Statement of Value in the interest of efficient tax administration, the IRS will refund the user fee. Free file form 4868 Authenticity. Free file form 4868   The authenticity of the donated art must be determined by the appraiser. Free file form 4868 Physical condition. Free file form 4868   Important items in the valuation of antiques and art are physical condition and extent of restoration. Free file form 4868 These have a significant effect on the value and must be fully reported in an appraisal. Free file form 4868 An antique in damaged condition, or lacking the “original brasses,” may be worth much less than a similar piece in excellent condition. Free file form 4868 Art appraisers. Free file form 4868   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. Free file form 4868 Certain art dealers or appraisers specialize, for example, in old masters, modern art, bronze sculpture, etc. Free file form 4868 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. Free file form 4868 They can report more recent comparable sales to support their opinion. Free file form 4868   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. Free file form 4868 It lists museums both by state and by category. Free file form 4868   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. Free file form 4868 The Yellow Pages often list specialized art and antique dealers, auctioneers, and art appraisers. Free file form 4868 You may be able to find a qualified appraiser on the Internet. Free file form 4868 You may also contact associations of dealers for guidance. Free file form 4868 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. Free file form 4868 Most common are rare books, autographs, sports memorabilia, dolls, manuscripts, stamps, coins, guns, phonograph records, and natural history items. Free file form 4868 Many of the elements of valuation that apply to paintings and other objects of art, discussed earlier, also apply to miscellaneous collections. Free file form 4868 Reference material. Free file form 4868   Publications available to help you determine the value of many kinds of collections include catalogs, dealers' price lists, and specialized hobby periodicals. Free file form 4868 When using one of these price guides, you must use the current edition at the date of contribution. Free file form 4868 However, these sources are not always reliable indicators of FMV and should be supported by other evidence. Free file form 4868   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. Free file form 4868 The price an item sold for in an auction may have been the result of a rigged sale or a mere bidding duel. Free file form 4868 The appraiser must analyze the reference material, and recognize and make adjustments for misleading entries. Free file form 4868 If you are donating a valuable collection, you should get an appraisal. Free file form 4868 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. Free file form 4868 Stamp collections. Free file form 4868   Most libraries have catalogs or other books that report the publisher's estimate of values. Free file form 4868 Generally, two price levels are shown for each stamp: the price postmarked and the price not postmarked. Free file form 4868 Stamp dealers generally know the value of their merchandise and are able to prepare satisfactory appraisals of valuable collections. Free file form 4868 Coin collections. Free file form 4868   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. Free file form 4868 Like many other collectors' items, the value of a coin depends on the demand for it, its age, and its rarity. Free file form 4868 Another important factor is the coin's condition. Free file form 4868 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. Free file form 4868   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. Free file form 4868 Books. Free file form 4868   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. Free file form 4868 This is difficult to do and, except for a collection of little value, should be done by a specialized appraiser. Free file form 4868 Within the general category of literary property, there are dealers who specialize in certain areas, such as Americana, foreign imports, Bibles, and scientific books. Free file form 4868 Modest value of collection. Free file form 4868   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. Free file form 4868   A book that is very old, or very rare, is not necessarily valuable. Free file form 4868 There are many books that are very old or rare, but that have little or no market value. Free file form 4868 Condition of book. Free file form 4868   The condition of a book may have a great influence on its value. Free file form 4868 Collectors are interested in items that are in fine, or at least good, condition. Free file form 4868 When a book has a missing page, a loose binding, tears, stains, or is otherwise in poor condition, its value is greatly lowered. Free file form 4868 Other factors. Free file form 4868   Some other factors in the valuation of a book are the kind of binding (leather, cloth, paper), page edges, and illustrations (drawings and photographs). Free file form 4868 Collectors usually want first editions of books. Free file form 4868 However, because of changes or additions, other editions are sometimes worth as much as, or more than, the first edition. Free file form 4868 Manuscripts, autographs, diaries, and similar items. Free file form 4868   When these items are handwritten, or at least signed by famous people, they are often in demand and are valuable. Free file form 4868 The writings of unknowns also may be of value if they are of unusual historical or literary importance. Free file form 4868 Determining the value of such material is difficult. Free file form 4868 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. Free file form 4868 The appraiser determines a value in these cases by applying knowledge and judgment to such factors as comparable sales and conditions. Free file form 4868 Signatures. Free file form 4868   Signatures, or sets of signatures, that were cut from letters or other papers usually have little or no value. Free file form 4868 But complete sets of the signatures of U. Free file form 4868 S. Free file form 4868 presidents are in demand. Free file form 4868 Cars, Boats, and Aircraft If you donate a car, a boat, or an aircraft to a charitable organization, its FMV must be determined. Free file form 4868 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. Free file form 4868 Prices are reported for each make, model, and year. Free file form 4868 These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. Free file form 4868 The prices are not “official,” and these publications are not considered an appraisal of any specific donated property. Free file form 4868 But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. Free file form 4868 These publications are sometimes available from public libraries or at a bank, credit union, or finance company. Free file form 4868 You can also find pricing information about used cars on the Internet. Free file form 4868 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. Free file form 4868 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. Free file form 4868 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. Free file form 4868 Example. Free file form 4868 You donate a used car in poor condition to a local high school for use by students studying car repair. Free file form 4868 A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. Free file form 4868 However, the guide shows the price for a private party sale of the car is only $750. Free file form 4868 The FMV of the car is considered to be no more than $750. Free file form 4868 Boats. Free file form 4868   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. Free file form 4868 More information. Free file form 4868   Your deduction for a donated car, boat, or airplane generally is limited to the gross proceeds from its sale by the qualified organization. Free file form 4868 This rule applies if the claimed value of the donated vehicle is more than $500. Free file form 4868 In certain cases, you can deduct the vehicle's FMV. Free file form 4868 For details, see Publication 526. Free file form 4868 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. Free file form 4868 For more information, see Publication 526. Free file form 4868 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. Free file form 4868 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. Free file form 4868 Generally, this means your deduction is the lesser of the property's FMV or its basis. Free file form 4868 For details, see Publication 526. Free file form 4868 Stocks and Bonds The value of stocks and bonds is the FMV of a share or bond on the valuation date. Free file form 4868 See Date of contribution, earlier, under What Is Fair Market Value (FMV). Free file form 4868 Selling prices on valuation date. Free file form 4868   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. Free file form 4868 For example, if the highest selling price for a share was $11, and the lowest $9, the average price is $10. Free file form 4868 You get the average price by adding $11 and $9 and dividing the sum by 2. Free file form 4868 No sales on valuation date. Free file form 4868   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. Free file form 4868 Then you weight these averages in inverse order by the respective number of trading days between the selling dates and the valuation date. Free file form 4868 Example. Free file form 4868   On the day you gave stock to a qualified organization, there were no sales of the stock. Free file form 4868 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. Free file form 4868 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. Free file form 4868   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. Free file form 4868 This applies if these prices are published in a generally available listing or publication of general circulation. Free file form 4868 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. Free file form 4868 See also Unavailable prices or closely held corporation, later. Free file form 4868 Bid and asked prices on valuation date. Free file form 4868   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. Free file form 4868 Example. Free file form 4868 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. Free file form 4868 The FMV is $15, the average price between the bid and asked prices. Free file form 4868 No prices on valuation date. Free file form 4868   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. Free file form 4868 Both dates must be within a reasonable period. Free file form 4868 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. Free file form 4868 Example. Free file form 4868 On the day you gave stock to a qualified organization, no prices were available. Free file form 4868 Bona fide bid and asked prices 3 days before the valuation date were $10 and 2 days after the valuation date were $15. Free file form 4868 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. Free file form 4868   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. Free file form 4868 Large blocks of stock. Free file form 4868   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. Free file form 4868 On the other hand, market forces may exist that will afford higher prices for large blocks of stock. Free file form 4868 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. Free file form 4868 Unavailable prices or closely held corporation. Free file form 4868   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. Free file form 4868 For bonds, the soundness of the security, the interest yield, the date of maturity, and other relevant factors. Free file form 4868 For shares of stock, the company's net worth, prospective earning power and dividend-paying capacity, and other relevant factors. Free file form 4868 Other factors. Free file form 4868   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. Free file form 4868 For preferred stock, the most important factors are its yield, dividend coverage, and protection of its liquidation preference. Free file form 4868   You should keep complete financial and other information on which the valuation is based. Free file form 4868 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. Free file form 4868 Restricted securities. Free file form 4868   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. Free file form 4868 These restricted securities usually trade at a discount in relation to freely traded securities. Free file form 4868   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. Free file form 4868 Real Estate Because each piece of real estate is unique and its valuation is complicated, a detailed appraisal by a professional appraiser is necessary. Free file form 4868 The appraiser must be thoroughly trained in the application of appraisal principles and theory. Free file form 4868 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. Free file form 4868 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. Free file form 4868 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. Free file form 4868 In general, there are three main approaches to the valuation of real estate. Free file form 4868 An appraisal may require the combined use of two or three methods rather than one method only. Free file form 4868 1. Free file form 4868 Comparable Sales The comparable sales method compares the donated property with several similar properties that have been sold. Free file form 4868 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. Free file form 4868 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. Free file form 4868 , Soil characteristics, vegetative cover, and status of mineral rights, and Other factors affecting value. Free file form 4868 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. Free file form 4868 The comparable selling prices must be adjusted to account for differences between the sale property and the donated property. Free file form 4868 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. Free file form 4868 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. Free file form 4868 2. Free file form 4868 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. Free file form 4868 The key elements are the determination of the income to be capitalized and the rate of capitalization. Free file form 4868 3. Free file form 4868 Replacement Cost New or Reproduction Cost Minus Observed Depreciation This method, used alone, usually does not result in a determination of FMV. Free file form 4868 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. Free file form 4868 Of course, this reasoning does not apply if a similar property cannot be created because of location, unusual construction, or some other reason. Free file form 4868 Generally, this method serves to support the value determined from other methods. Free file form 4868 When the replacement cost method is applied to improved realty, the land and improvements are valued separately. Free file form 4868 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. Free file form 4868 This cost represents the total cost of labor and material, overhead, and profit. Free file form 4868 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. Free file form 4868 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. Free file form 4868 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. Free file form 4868 The value of the goodwill of the business should also be taken into consideration. Free file form 4868 You should keep complete financial and other information on which you base the valuation. Free file form 4868 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. Free file form 4868 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. Free file form 4868 The valuation of these commercial annuity contracts and of insurance policies is discussed later under Certain Life Insurance and Annuity Contracts. Free file form 4868 To determine present value, you must know the applicable interest rate and use actuarial tables. Free file form 4868 Interest rate. Free file form 4868   The applicable interest rate varies. Free file form 4868 It is announced monthly in a news release and published in the Internal Revenue Bulletin as a Revenue Ruling. Free file form 4868 The interest rate to use is under the heading “Rate Under Section 7520” for a given month and year. Free file form 4868 You can call the IRS office at 1-800-829-1040 to obtain this rate. Free file form 4868 Actuarial tables. Free file form 4868   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. Free file form 4868   Use the valuation tables set forth in IRS Publications 1457, Actuarial Values (Book Aleph), and 1458, Actuarial Values (Book Beth). Free file form 4868 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. Free file form 4868 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. Free file form 4868   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. Free file form 4868 Publication 1458 contains the factors for valuing the remainder interest in a charitable remainder unitrust. Free file form 4868 You can download Publications 1457 and 1458 from www. Free file form 4868 irs. Free file form 4868 gov. Free file form 4868 In addition, they are available for purchase via the website of the U. Free file form 4868 S. Free file form 4868 Government Printing Office, by phone at (202) 512-1800, or by mail from the: Superintendent of Documents P. Free file form 4868 O. Free file form 4868 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. Free file form 4868 642(c)-6(e)(6), transfers to charitable remainder unitrusts in Regulation 1. Free file form 4868 664-4(e), and other transfers in Regulation 20. Free file form 4868 2031-7(d)(6). Free file form 4868 Special factors. Free file form 4868   If you need a special factor for an actual transaction, you can request a letter ruling. Free file form 4868 Be sure to include the date of birth of each person the duration of whose life may affect the value of the interest. Free file form 4868 Also include copies of the relevant instruments. Free file form 4868 IRS charges a user fee for providing special factors. Free file form 4868   For more information about requesting a ruling, see Revenue Procedure 2006-1 (or annual update), 2006-1 I. Free file form 4868 R. Free file form 4868 B. Free file form 4868 1. Free file form 4868 Revenue Procedure 2006-1 is available at www. Free file form 4868 irs. Free file form 4868 gov/irb/2006-01_IRB/ar06. Free file form 4868 html. Free file form 4868   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. Free file form 4868 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. Free file form 4868 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. Free file form 4868 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. Free file form 4868 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. Free file form 4868 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. Free file form 4868 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. Free file form 4868 To determine this value, you must know the FMV of the property on the date of the contribution. Free file form 4868 Multiply this value by the appropriate factor. Free file form 4868 Publications 1457 and 1458 contain these factors. Free file form 4868 You must make an adjustment for depreciation or depletion using the factors shown in Publication 1459, Actuarial Values (Book Gimel). Free file form 4868 You can use the factors for the month in which you made the contribution or for either of the two months preceding that month. Free file form 4868 See the earlier discussion on Annuities, Interests for Life or Terms of Years, Remainders, and Reversions. Free file form 4868 You can download Publication 1459 from www. Free file form 4868 irs. Free file form 4868 gov. Free file form 4868 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. Free file form 4868 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. Free file form 4868 This rule also applies to a gift of a remainder interest that includes property that is part depletable and part not depletable. Free file form 4868 Take into account depreciation or depletion only for the property that is subject to depreciation or depletion. Free file form 4868 For more information, see section 1. Free file form 4868 170A-12 of the Income Tax Regulations. Free file form 4868 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. Free file form 4868 It must extend over the entire term of your interest in the property. Free file form 4868 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. Free file form 4868 You can claim a deduction for the contribution if you do not have any other interest in the property. Free file form 4868 To figure the value of a contribution involving a partial interest, see Publication 1457. Free file form 4868 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. Free file form 4868 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. Free file form 4868 Qualified organization. Free file form 4868   For purposes of a qualified conservation contribution, a qualified organization is: A governmental unit, A publicly supported charitable, religious, scientific, literary, educational, etc. Free file form 4868 , organization, or An organization that is controlled by, and operated for the exclusive benefit of, a governmental unit or a publicly supported charity. Free file form 4868 The organization also must have a commitment to protect the conservation purposes of the donation and must have the resources to enforce the restrictions. Free file form 4868 Conservation purposes. Free file form 4868   Your contribution must be made only for one of the following conservation purposes. Free file form 4868 Preserving land areas for outdoor recreation by, or for the education of, the general public. Free file form 4868 Protecting a relatively natural habitat of fish, wildlife, or plants, or a similar ecosystem. Free file form 4868 Preserving open space, including farmland and forest land, if it yields a significant public benefit. Free file form 4868 It must be either for the scenic enjoyment of the general public or under a clearly defined federal, state, or local governmental conservation policy. Free file form 4868 Preserving a historically important land area or a certified historic structure. Free file form 4868 There must be some visual public access to the property. Free file form 4868 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. Free file form 4868 Building in registered historic district. Free file form 4868   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. Free file form 4868 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. Free file form 4868 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. Free file form 4868 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. Free file form 4868   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. Free file form 4868 See Form 8283-V, Payment Voucher for Filing Fee Under Section 170(f)(13), and its instructions. Free file form 4868 Qualified real property interest. Free file form 4868   This is any of the following interests in real property. Free file form 4868 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). Free file form 4868 A remainder interest. Free file form 4868 A restriction (granted in perpetuity) on the use that may be made of the real property. Free file form 4868 Valuation. Free file form 4868   A qualified real property interest described in (1) should be valued in a manner that is consistent with the type of interest transferred. Free file form 4868 If you transferred all the interest in the property, the FMV of the property is the amount of the contribution. Free file form 4868 If you do not transfer the mineral interest, the FMV of the surface rights in the property is the amount of the contribution. Free file form 4868   If you owned only a remainder interest or an income interest (life estate), see Undivided Part of Your Entire Interest, earlier. Free file form 4868 If you owned the entire property but transferred only a remainder interest (item (2)), see Remainder Interest in Real Property, earlier. Free file form 4868   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. Free file form 4868 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. Free file form 4868   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. Free file form 4868 You should also consider any zoning, conservation, or historical preservation laws that would restrict development. Free file form 4868 Granting an easement may increase, rather than reduce, the value of property, and in such a situation no deduction would be allowed. Free file form 4868 Example. Free file form 4868   You own 10 acres of farmland. Free file form 4868 Similar land in the area has an FMV of $2,000 an acre. Free file form 4868 However, land in the general area that is restricted solely to farm use has an FMV of $1,500 an acre. Free file form 4868 Your county wants to preserve open space and prevent further development in your area. Free file form 4868   You grant to the county an enforceable open space easement in perpetuity on 8 of the 10 acres, restricting its use to farmland. Free file form 4868 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. Free file form 4868 More information. Free file form 4868   For more information about qualified conservation contributions, see Publication 526. Free file form 4868 Appraisals Appraisals are not necessary for items of property for which you claim a deduction of $5,000 or less. Free file form 4868 (There is one exception, described next, for certain clothing and household items. Free file form 4868 ) However, you generally will need an appraisal for donated property for which you claim a deduction of more than $5,000. Free file form 4868 There are exceptions. Free file form 4868 See Deductions of More Than $5,000, later. Free file form 4868 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. Free file form 4868 An appraisal must give all the facts on which to base an intelligent judgment of the value of the property. Free file form 4868 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. Free file form 4868 The appraiser's opinion is never more valid than the facts on which it is based; without these facts it is simply a guess. Free file form 4868 The opinion of a person claiming to be an expert is not binding on the Internal Revenue Service. Free file form 4868 All facts associated with the donation must be considered. Free file form 4868 Deduction over $500 for certain clothing or household items. Free file form 4868   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. Free file form 4868 See Household Goods and Used Clothing, earlier. Free file form 4868 Cost of appraisals. Free file form 4868   You may not take a charitable contribution deduction for fees you pay for appraisals of your donated property. Free file form 4868 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. Free file form 4868 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. Free file form 4868 There are exceptions, discussed later. Free file form 4868 You should keep the appraiser's report with your written records. Free file form 4868 Records are discussed in Publication 526. Free file form 4868 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. Free file form 4868 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. Free file form 4868 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. Free file form 4868 Exceptions. Free file form 4868   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. Free file form 4868   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. Free file form 4868 Publicly traded securities. Free file form 4868   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. Free file form 4868 Publicly traded securities that meet these requirements must be reported on Form 8283, Section A. Free file form 4868   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. Free file form 4868   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. Free file form 4868 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. Free file form 4868   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. Free file form 4868 Bid and asked quotations are not taken into account. Free file form 4868   The computation period is weekly during October through December and monthly during January through September. Free file form 4868 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. Free file form 4868 Nonpublicly traded stock. Free file form 4868   If you contribute nonpublicly traded stock, for which you claim a deduction of $10,000 or less, a qualified appraisal is not required. Free file form 4868 However, you must attach Form 8283 to your tax return, with Section B, Parts I and IV, completed. Free file form 4868 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. Free file form 4868 This does not apply to contributions of cash, inventory, publicly traded stock, or intellectual property. Free file form 4868 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. Free file form 4868 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. Free file form 4868 You must also complete Form 8283, Section B, and attach it to your tax return. Free file form 4868 See Deductions of More Than $5,000, earlier. Free file form 4868 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. Free file form 4868 170A-13(c)(3) and Notice 2006-96, 2006-46 I. Free file form 4868 R. Free file form 4868 B. Free file form 4868 902 (available at www. Free file form 4868 irs. Free file form 4868 gov/irb/2006-46_IRB/ar13. Free file form 4868 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). Free file form 4868 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. Free file form 4868 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. Free file form 4868 Form 8283, Section B, must be attached to your tax return. Free file form 4868 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. Free file form 4868 There are four exceptions. Free file form 4868 If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the appraisal. Free file form 4868 See Paintings, Antiques, and Other Objects of Art, earlier. Free file form 4868 If you claim a deduction of more than $500,000 for a donation of property, you must attach the appraisal. Free file form 4868 See Deductions of More Than $500,000, earlier. Free file form 4868 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. Free file form 4868 See Deduction over $500 for certain clothing or household items, earlier. Free file form 4868 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. Free file form 4868 See Building in registered historic district, earlier. Free file form 4868 Prohibited appraisal fee. Free file form 4868   Generally, no part of the fee arrangement for a qualified appraisal can be based on a percentage of the appraised value of the property. Free file form 4868 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. Free file form 4868 However, appraisals are not disqualified when an otherwise prohi