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Myfreetaxes com baltimorecash 5. Myfreetaxes com baltimorecash   Soil and Water Conservation Expenses Table of Contents Introduction Topics - This chapter discusses: Business of Farming Plan Certification Conservation ExpensesWater well. Myfreetaxes com baltimorecash Assessment by Conservation DistrictAssessment for Depreciable Property 25% Limit on DeductionNet operating loss. Myfreetaxes com baltimorecash When to Deduct or Capitalize Sale of a Farm Introduction If you are in the business of farming, you can choose to deduct certain expenses for: Soil or water conservation, Prevention of erosion of land used in farming, or Endangered species recovery. Myfreetaxes com baltimorecash Otherwise, these are capital expenses that must be added to the basis of the land. Myfreetaxes com baltimorecash (See chapter 6 for information on determining basis. Myfreetaxes com baltimorecash ) Conservation expenses for land in a foreign country do not qualify for this special treatment. Myfreetaxes com baltimorecash The deduction for conservation expenses cannot be more than 25% of your gross income from farming. Myfreetaxes com baltimorecash See 25% Limit on Deduction , later. Myfreetaxes com baltimorecash Although some expenses are not deductible as soil and water conservation expenses, they may be deductible as ordinary and necessary farm expenses. Myfreetaxes com baltimorecash These include interest and taxes, the cost of periodically clearing brush from productive land, the regular removal of sediment from a drainage ditch, and expenses paid or incurred primarily to produce an agricultural crop that may also conserve soil. Myfreetaxes com baltimorecash You must include in income most government payments for approved conservation practices. Myfreetaxes com baltimorecash However, you can exclude some payments you receive under certain cost-sharing conservation programs. Myfreetaxes com baltimorecash For more information, see Agricultural Program Payments in chapter 3. Myfreetaxes com baltimorecash To get the full deduction to which you are entitled, you should maintain your records to clearly distinguish between your ordinary and necessary farm business expenses and your soil and water conservation expenses. Myfreetaxes com baltimorecash Topics - This chapter discusses: Business of farming Plan certification Conservation expenses Assessment by conservation district 25% limit on deduction When to deduct or capitalize Sale of a farm Business of Farming For purposes of soil and water conservation expenses, you are in the business of farming if you cultivate, operate, or manage a farm for profit, either as an owner or a tenant. Myfreetaxes com baltimorecash You are not in the business of farming if you cultivate or operate a farm for recreation or pleasure, rather than for profit. Myfreetaxes com baltimorecash You are not farming if you are engaged only in forestry or the growing of timber. Myfreetaxes com baltimorecash Farm defined. Myfreetaxes com baltimorecash   A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. Myfreetaxes com baltimorecash It also includes plantations, ranches, ranges, and orchards. Myfreetaxes com baltimorecash A fish farm is an area where fish and other marine animals are grown or raised and artificially fed, protected, etc. Myfreetaxes com baltimorecash It does not include an area where they are merely caught or harvested. Myfreetaxes com baltimorecash A plant nursery is a farm for purposes of deducting soil and water conservation expenses. Myfreetaxes com baltimorecash Farm rental. Myfreetaxes com baltimorecash   If you own a farm and receive farm rental payments based on farm production, either in cash or crop shares, you are in the business of farming. Myfreetaxes com baltimorecash If you get cash rental for a farm you own that is not used in farm production, you cannot deduct soil and water conservation expenses for that farm. Myfreetaxes com baltimorecash   If you receive a fixed rental payment that is not based on farm production, you are in the business of farming only if you materially participate in operating or managing the farm. Myfreetaxes com baltimorecash Example. Myfreetaxes com baltimorecash You own a farm in Iowa and live in California. Myfreetaxes com baltimorecash You rent the farm for $175 in cash per acre and do not materially participate in producing or managing production of the crops grown on the farm. Myfreetaxes com baltimorecash You cannot deduct your soil conservation expenses for this farm. Myfreetaxes com baltimorecash You must capitalize the expenses and add them to the basis of the land. Myfreetaxes com baltimorecash     For more information, see Material participation for landlords under Landlord Participation in Farming in chapter 12. Myfreetaxes com baltimorecash Plan Certification You can deduct soil and water conservation expenses only if they are consistent with a plan approved by the Natural Resources Conservation Service (NRCS) of the Department of Agriculture. Myfreetaxes com baltimorecash If no such plan exists, the expenses must be consistent with a soil conservation plan of a comparable state agency. Myfreetaxes com baltimorecash Keep a copy of the plan with your books and records to support your deductions. Myfreetaxes com baltimorecash Conservation plan. Myfreetaxes com baltimorecash   A conservation plan includes the farming conservation practices approved for the area where your farmland is located. Myfreetaxes com baltimorecash There are three types of approved plans. Myfreetaxes com baltimorecash NRCS individual site plans. Myfreetaxes com baltimorecash These plans are issued individually to farmers who request assistance from NRCS to develop a conservation plan designed specifically for their farmland. Myfreetaxes com baltimorecash NRCS county plans. Myfreetaxes com baltimorecash These plans include a listing of farm conservation practices approved for the county where the farmland is located. Myfreetaxes com baltimorecash You can deduct expenses for conservation practices not included on the NRCS county plans only if the practice is a part of an individual site plan. Myfreetaxes com baltimorecash Comparable state agency plans. Myfreetaxes com baltimorecash These plans are approved by state agencies and can be approved individual site plans or county plans. Myfreetaxes com baltimorecash   A list of NRCS conservation programs is available at www. Myfreetaxes com baltimorecash nrcs. Myfreetaxes com baltimorecash usda. Myfreetaxes com baltimorecash gov/programs. Myfreetaxes com baltimorecash Individual site plans can be obtained from NRCS offices and the comparable state agencies. Myfreetaxes com baltimorecash Conservation Expenses You can deduct conservation expenses only for land you or your tenant are using, or have used in the past, for farming. Myfreetaxes com baltimorecash These expenses include, but are not limited to, the following. Myfreetaxes com baltimorecash The treatment or movement of earth, such as: Leveling, Conditioning, Grading, Terracing, Contour furrowing, and Restoration of soil fertility. Myfreetaxes com baltimorecash The construction, control, and protection of: Diversion channels, Drainage ditches, Irrigation ditches, Earthen dams, and Watercourses, outlets, and ponds. Myfreetaxes com baltimorecash The eradication of brush. Myfreetaxes com baltimorecash The planting of windbreaks. Myfreetaxes com baltimorecash You cannot deduct expenses to drain or fill wetlands, or to prepare land for center pivot irrigation systems, as soil and water conservation expenses. Myfreetaxes com baltimorecash These expenses are added to the basis of the land. Myfreetaxes com baltimorecash If you choose to deduct soil and water conservation expenses, you cannot exclude from gross income any cost-sharing payments you receive for those expenses. Myfreetaxes com baltimorecash See chapter 3 for information about payments eligible for the cost-sharing exclusion. Myfreetaxes com baltimorecash New farm or farmland. Myfreetaxes com baltimorecash   If you acquire a new farm or new farmland from someone who was using it in farming immediately before you acquired the land, soil and water conservation expenses you incur on it will be treated as made on land used in farming at the time the expenses were paid or incurred. Myfreetaxes com baltimorecash You can deduct soil and water conservation expenses for this land if your use of it is substantially a continuation of its use in farming. Myfreetaxes com baltimorecash The new farming activity does not have to be the same as the old farming activity. Myfreetaxes com baltimorecash For example, if you buy land that was used for grazing cattle and then prepare it for use as an apple orchard, you can deduct your conservation expenses. Myfreetaxes com baltimorecash Land not used for farming. Myfreetaxes com baltimorecash   If your conservation expenses benefit both land that does not qualify as land used for farming and land that does qualify, you must allocate the expenses between the two types of land. Myfreetaxes com baltimorecash For example, if the expenses benefit 200 acres of your land, but only 120 acres of this land are used for farming, then you can deduct 60% (120 ÷ 200) of the expenses. Myfreetaxes com baltimorecash You can use another method to allocate these expenses if you can clearly show that your method is more reasonable. Myfreetaxes com baltimorecash Depreciable conservation assets. Myfreetaxes com baltimorecash   You generally cannot deduct your expenses for depreciable conservation assets. Myfreetaxes com baltimorecash However, you can deduct certain amounts you pay or incur for an assessment for depreciable property that a soil and water conservation or drainage district levies against your farm. Myfreetaxes com baltimorecash See Assessment for Depreciable Property , later. Myfreetaxes com baltimorecash   You must capitalize expenses to buy, build, install, or improve depreciable structures or facilities. Myfreetaxes com baltimorecash These expenses include those for materials, supplies, wages, fuel, hauling, and moving dirt when making structures such as tanks, reservoirs, pipes, culverts, canals, dams, wells, or pumps composed of masonry, concrete, tile, metal, or wood. Myfreetaxes com baltimorecash You recover your capital investment through annual allowances for depreciation. Myfreetaxes com baltimorecash   You can deduct soil and water conservation expenses for nondepreciable earthen items. Myfreetaxes com baltimorecash Nondepreciable earthen items include certain dams, ponds, and terraces described under Property Having a Determinable Useful Life in chapter 7. Myfreetaxes com baltimorecash Water well. Myfreetaxes com baltimorecash   You cannot deduct the cost of drilling a water well for irrigation and other agricultural purposes as a soil and water conservation expense. Myfreetaxes com baltimorecash It is a capital expense. Myfreetaxes com baltimorecash You recover your cost through depreciation. Myfreetaxes com baltimorecash You also must capitalize your cost for drilling a test hole. Myfreetaxes com baltimorecash If the test hole produces no water and you continue drilling, the cost of the test hole is added to the cost of the producing well. Myfreetaxes com baltimorecash You can recover the total cost through depreciation deductions. Myfreetaxes com baltimorecash   If a test hole, dry hole, or dried-up well (resulting from prolonged lack of rain, for instance) is abandoned, you can deduct your unrecovered cost in the year of abandonment. Myfreetaxes com baltimorecash Abandonment means that all economic benefits from the well are terminated. Myfreetaxes com baltimorecash For example, filling or sealing a well excavation or casing so that all economic benefits from the well are terminated constitutes an abandonment. Myfreetaxes com baltimorecash Endangered species recovery expenses. Myfreetaxes com baltimorecash   If you are in the business of farming and meet other specific requirements, you can choose to deduct the conservation expenses discussed earlier as endangered species recovery expenses. Myfreetaxes com baltimorecash Otherwise, these are capital expenses that must be added to the basis of the land. Myfreetaxes com baltimorecash   The expenses must be paid or incurred for the purpose of achieving site-specific management actions recommended in a recovery plan approved under section 4(f) of the Endangered Species Act of 1973. Myfreetaxes com baltimorecash See Internal Revenue Code section 175 for more information. Myfreetaxes com baltimorecash Assessment by Conservation District In some localities, a soil or water conservation or drainage district incurs expenses for soil or water conservation and levies an assessment against the farmers who benefit from the expenses. Myfreetaxes com baltimorecash You can deduct as a conservation expense amounts you pay or incur for the part of an assessment that: Covers expenses you could deduct if you had paid them directly, or Covers expenses for depreciable property used in the district's business. Myfreetaxes com baltimorecash Assessment for Depreciable Property You generally can deduct as a conservation expense amounts you pay or incur for the part of a conservation or drainage district assessment that covers expenses for depreciable property. Myfreetaxes com baltimorecash This includes items such as pumps, locks, concrete structures (including dams and weir gates), draglines, and similar equipment. Myfreetaxes com baltimorecash The depreciable property must be used in the district's soil and water conservation activities. Myfreetaxes com baltimorecash However, the following limits apply to these assessments. Myfreetaxes com baltimorecash The total assessment limit. Myfreetaxes com baltimorecash The yearly assessment limit. Myfreetaxes com baltimorecash After you apply these limits, the amount you can deduct is added to your other conservation expenses for the year. Myfreetaxes com baltimorecash The total for these expenses is then subject to the 25% of gross income from farming limit on the deduction, discussed later. Myfreetaxes com baltimorecash See Table 5-1 for a brief summary of these limits. Myfreetaxes com baltimorecash Table 5-1. Myfreetaxes com baltimorecash Limits on Deducting an Assessment by a Conservation District for Depreciable Property Total Limit on Deduction for Assessment for Depreciable Property Yearly Limit on Deduction for Assessment for Depreciable Property Yearly Limit for All Conservation Expenses 10% of: $500 + 10% of: 25% of: Total assessment against all members of the district for the property. Myfreetaxes com baltimorecash Your deductible share of the cost to the district for the property. Myfreetaxes com baltimorecash Your gross income from farming. Myfreetaxes com baltimorecash No one taxpayer can deduct more than 10% of the total assessment. Myfreetaxes com baltimorecash Any amount over 10% is a capital expense and is added to the basis of your land. Myfreetaxes com baltimorecash If an assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. Myfreetaxes com baltimorecash If the amount you pay or incur for any year is more than the limit, you can deduct for that year only 10% of your deductible share of the cost. Myfreetaxes com baltimorecash You can deduct the remainder in equal amounts over the next 9 tax years. Myfreetaxes com baltimorecash Limit for all conservation expenses, including assessments for depreciable property. Myfreetaxes com baltimorecash Amounts greater than 25% can be carried to the following year and added to that year's expenses. Myfreetaxes com baltimorecash The total is then subject to the 25% of gross income from farming limit in that year. Myfreetaxes com baltimorecash To ensure your deduction is within the deduction limits, keep records to show the following. Myfreetaxes com baltimorecash The total assessment against all members of the district for the depreciable property. Myfreetaxes com baltimorecash Your deductible share of the cost to the district for the depreciable property. Myfreetaxes com baltimorecash Your gross income from farming. Myfreetaxes com baltimorecash Total assessment limit. Myfreetaxes com baltimorecash   You cannot deduct more than 10% of the total amount assessed to all members of the conservation or drainage district for the depreciable property. Myfreetaxes com baltimorecash This applies whether you pay the assessment in one payment or in installments. Myfreetaxes com baltimorecash If your assessment is more than 10% of the total amount assessed, both the following rules apply. Myfreetaxes com baltimorecash The amount over 10% is a capital expense and is added to the basis of your land. Myfreetaxes com baltimorecash If the assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. Myfreetaxes com baltimorecash Yearly assessment limit. Myfreetaxes com baltimorecash   The maximum amount you can deduct in any one year is the total of 10% of your deductible share of the cost as explained earlier, plus $500. Myfreetaxes com baltimorecash If the amount you pay or incur is equal to or less than the maximum amount, you can deduct it in the year it is paid or incurred. Myfreetaxes com baltimorecash If the amount you pay or incur is more, you can deduct in that year only 10% of your deductible share of the cost. Myfreetaxes com baltimorecash You can deduct the remainder in equal amounts over the next 9 tax years. Myfreetaxes com baltimorecash Your total conservation expense deduction for each year is also subject to the 25% of gross income from farming limit on the deduction, discussed later. Myfreetaxes com baltimorecash Example 1. Myfreetaxes com baltimorecash This year, the soil conservation district levies and you pay an assessment of $2,400 against your farm. Myfreetaxes com baltimorecash Of the assessment, $1,500 is for digging drainage ditches. Myfreetaxes com baltimorecash You can deduct this part as a soil or conservation expense as if you had paid it directly. Myfreetaxes com baltimorecash The remaining $900 is for depreciable equipment to be used in the district's irrigation activities. Myfreetaxes com baltimorecash The total amount assessed by the district against all its members for the depreciable equipment is $7,000. Myfreetaxes com baltimorecash The total amount you can deduct for the depreciable equipment is limited to 10% of the total amount assessed by the district against all its members for depreciable equipment, or $700. Myfreetaxes com baltimorecash The $200 excess ($900 − $700) is a capital expense you must add to the basis of your farm. Myfreetaxes com baltimorecash To figure the maximum amount you can deduct for the depreciable equipment this year, multiply your deductible share of the total assessment ($700) by 10%. Myfreetaxes com baltimorecash Add $500 to the result for a total of $570. Myfreetaxes com baltimorecash Your deductible share, $700, is greater than the maximum amount deductible in one year, so you can deduct only $70 of the amount you paid or incurred for depreciable property this year (10% of $700). Myfreetaxes com baltimorecash You can deduct the balance at the rate of $70 a year over the next 9 years. Myfreetaxes com baltimorecash You add $70 to the $1,500 portion of the assessment for drainage ditches. Myfreetaxes com baltimorecash You can deduct $1,570 of the $2,400 assessment as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed later. Myfreetaxes com baltimorecash Example 2. Myfreetaxes com baltimorecash Assume the same facts in Example 1 except that $1,850 of the $2,400 assessment is for digging drainage ditches and $550 is for depreciable equipment. Myfreetaxes com baltimorecash The total amount assessed by the district against all its members for depreciable equipment is $5,500. Myfreetaxes com baltimorecash The total amount you can deduct for the depreciable equipment is limited to 10% of this amount, or $550. Myfreetaxes com baltimorecash The maximum amount you can deduct this year for the depreciable equipment is $555 (10% of your deductible share of the total assessment, $55, plus $500). Myfreetaxes com baltimorecash Since your deductible share is less than the maximum amount deductible in one year, you can deduct the entire $550 this year. Myfreetaxes com baltimorecash You can deduct the entire assessment, $2,400, as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed below. Myfreetaxes com baltimorecash Sale or other disposal of land during 9-year period. Myfreetaxes com baltimorecash   If you dispose of the land during the 9-year period for deducting conservation expenses subject to the yearly limit, any amounts you have not yet deducted because of this limit are added to the basis of the property. Myfreetaxes com baltimorecash Death of farmer during 9-year period. Myfreetaxes com baltimorecash   If a farmer dies during the 9-year period, any remaining amounts not yet deducted are deducted in the year of death. Myfreetaxes com baltimorecash 25% Limit on Deduction The total deduction for conservation expenses in any tax year is limited to 25% of your gross income from farming for the year. Myfreetaxes com baltimorecash Gross income from farming. Myfreetaxes com baltimorecash   Gross income from farming is the income you derive in the business of farming from the production of crops, fish, fruits, other agricultural products, or livestock. Myfreetaxes com baltimorecash Gains from sales of draft, breeding, or dairy livestock are included. Myfreetaxes com baltimorecash Gains from sales of assets such as farm machinery, or from the disposition of land, are not included. Myfreetaxes com baltimorecash Carryover of deduction. Myfreetaxes com baltimorecash   If your deductible conservation expenses in any year are more than 25% of your gross income from farming for that year, you can carry the unused deduction over to later years. Myfreetaxes com baltimorecash However, the deduction in any later year is limited to 25% of the gross income from farming for that year as well. Myfreetaxes com baltimorecash Example. Myfreetaxes com baltimorecash In 2012, you have gross income of $32,000 from two farms. Myfreetaxes com baltimorecash During the year, you incurred $10,000 of deductible soil and water conservation expenses for one of the farms. Myfreetaxes com baltimorecash However, your deduction is limited to 25% of $32,000, or $8,000. Myfreetaxes com baltimorecash The $2,000 excess ($10,000 − $8,000) is carried over to 2013 and added to deductible soil and water conservation expenses made in that year. Myfreetaxes com baltimorecash The total of the 2012 carryover plus 2013 expenses is deductible in 2013, subject to the limit of 25% of your gross income from farming in 2013. Myfreetaxes com baltimorecash Any expenses over the limit in that year are carried to 2014 and later years. Myfreetaxes com baltimorecash Net operating loss. Myfreetaxes com baltimorecash   The deduction for soil and water conservation expenses, after applying the 25% limit, is included when figuring a net operating loss (NOL) for the year. Myfreetaxes com baltimorecash If the NOL is carried to another year, the soil and water conservation deduction included in the NOL is not subject to the 25% limit in the year to which it is carried. Myfreetaxes com baltimorecash When to Deduct or Capitalize If you choose to deduct soil and water conservation expenses, you must deduct the total allowable amount on your tax return for the first year you pay or incur these expenses. Myfreetaxes com baltimorecash If you do not choose to deduct the expenses, you must capitalize them. Myfreetaxes com baltimorecash Change of method. Myfreetaxes com baltimorecash   If you want to change your method for the treatment of soil and water conservation expenses, or you want to treat the expenses for a particular project or a single farm in a different manner, you must get the approval of the IRS. Myfreetaxes com baltimorecash To get this approval, submit a written request by the due date of your return for the first tax year you want the new method to apply. Myfreetaxes com baltimorecash You or your authorized representative must sign the request. Myfreetaxes com baltimorecash   The request must include the following information. Myfreetaxes com baltimorecash Your name and address. Myfreetaxes com baltimorecash The first tax year the method or change of method is to apply. Myfreetaxes com baltimorecash Whether the method or change of method applies to all your soil and water conservation expenses or only to those for a particular project or farm. Myfreetaxes com baltimorecash If the method or change of method does not apply to all your expenses, identify the project or farm to which the expenses apply. Myfreetaxes com baltimorecash The total expenses you paid or incurred in the first tax year the method or change of method is to apply. Myfreetaxes com baltimorecash A statement that you will account separately in your books for the expenses to which this method or change of method relates. Myfreetaxes com baltimorecash Send your request to the following  address. Myfreetaxes com baltimorecash  Department of the Treasury Internal Revenue Service Center Cincinnati, OH 45999  For more information, see Change in  Accounting Method in chapter 2. Myfreetaxes com baltimorecash Sale of a Farm If you sell your farm, you cannot adjust the basis of the land at the time of the sale for any unused carryover of soil and water conservation expenses (except for deductions of assessments for depreciable property, discussed earlier). Myfreetaxes com baltimorecash However, if you acquire another farm and return to the business of farming, you can start taking deductions again for the unused carryovers. Myfreetaxes com baltimorecash Gain on sale of farmland. Myfreetaxes com baltimorecash   If you held the land 5 years or less before you sold it, gain on the sale of the land is treated as ordinary income up to the amount you previously deducted for soil and water conservation expenses. Myfreetaxes com baltimorecash If you held the land less than 10 but more than 5 years, the gain is treated as ordinary income up to a specified percentage of the previous deductions. Myfreetaxes com baltimorecash See Section 1252 property under Other Gains in chapter 9. Myfreetaxes com baltimorecash Prev  Up  Next   Home   More Online Publications
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The Myfreetaxes Com Baltimorecash

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