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Tax Questions For Students

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Tax Questions For Students

Tax questions for students Publication 596SP - Introductory Material Table of Contents Acontecimientos Futuros ¿Qué es el Crédito por Ingreso del Trabajo (EIC)? ¿Puedo Reclamar el Crédito por Ingreso del Trabajo (EIC)? ¿Necesito esta Publicación? ¿Hay que Tener un Hijo para Tener Derecho al Crédito por Ingreso del Trabajo (EIC)? ¿Cómo Calculo la Cantidad del Crédito por Ingreso del Trabajo (EIC)? ¿Cómo Puedo Encontrar Rápidamente Información Específica? ¿Hay Ayuda Disponible en Internet? Qué Hay de Nuevo para el año 2013 Recordatorios Acontecimientos Futuros Para la información más actualizada sobre los acontecimientos que afectan la Publicación 596(SP), tales como legislación promulgada después de su publicación, visite www. Tax questions for students irs. Tax questions for students gov/pub596sp, en inglés. Tax questions for students ¿Qué es el Crédito por Ingreso del Trabajo (EIC)? El crédito por ingreso del trabajo (EIC, por sus siglas en inglés) es un crédito tributario para aquellas personas que trabajan y que reciben ingreso del trabajo inferior a $51,567. Tax questions for students Un crédito tributario significa que va a tener más dinero disponible porque reduce la cantidad de impuesto a pagar. Tax questions for students El crédito por ingreso del trabajo (EIC) también podría proporcionarle un reembolso. Tax questions for students ¿Puedo Reclamar el Crédito por Ingreso del Trabajo (EIC)? Para tener derecho al crédito por ingreso del trabajo (EIC), tiene que cumplir determinados requisitos. Tax questions for students Dichos requisitos se resumen en la Tabla 1. Tax questions for students Tabla 1. Tax questions for students Síntesis del Crédito por Ingreso del Trabajo Primero, tiene que cumplir todos los requisitos de esta columna. Tax questions for students Segundo, tiene que cumplir todos los requisitos de una de estas columnas, la que le corresponda. Tax questions for students Tercero, tiene que cumplir el requisito de esta columna. Tax questions for students Capítulo 1. Tax questions for students  Requisitos para Todos Capítulo 2. Tax questions for students  Requisitos que Tiene que Cumplir si Tiene un Hijo Calificado Capítulo 3. Tax questions for students  Requisitos que Tiene que Cumplir si no Tiene un Hijo Calificado Capítulo 4. Tax questions for students  Calcular y Reclamar el Crédito por Ingreso del Trabajo (EIC) 1. Tax questions for students Tiene que tener  ingresos brutos ajustados (AGI, por sus siglas en inglés) inferiores a:  • $46,227 ($51,567 para casados que presentan una declaración conjunta) si tiene tres o más hijos calificados,  • $43,038 ($48,378 para casados que presentan una declaración conjunta) si tiene dos hijos calificados,  • $37,870 ($43,210 para casados que presentan una declaración conjunta) si tiene un hijo calificado o  • $14,340 ($19,680 para casados que presentan una declaración conjunta) si no tiene un hijo calificado. Tax questions for students 2. Tax questions for students Tiene que tener un número de Seguro Social válido. Tax questions for students   3. Tax questions for students Su estado civil para efectos de la declaración no puede ser  “casado que presenta la declaración por separado”. Tax questions for students   4. Tax questions for students Tiene que ser ciudadano de los Estados Unidos o extranjero residente durante todo el año. Tax questions for students   5. Tax questions for students No puede presentar el Formulario 2555 ni el Formulario 2555-EZ (relacionado con el ingreso del trabajo en el extranjero). Tax questions for students   6. Tax questions for students Sus ingresos procedentes de inversiones tienen que ser de $3,300 o menos. Tax questions for students    7. Tax questions for students Tiene que haber recibido ingreso del trabajo. Tax questions for students 8. Tax questions for students Su hijo tiene que cumplir los requisitos de parentesco, edad, residencia y de declaración conjunta. Tax questions for students   9. Tax questions for students Soló una persona puede utilizar su hijo calificado para fines de reclamar el crédito por ingreso del trabajo (EIC). Tax questions for students   10. Tax questions for students Usted no puede ser el hijo calificado de otra persona. Tax questions for students 11. Tax questions for students Tiene que tener por lo menos 25 años de edad pero menos de 65 años de edad. Tax questions for students   12. Tax questions for students Usted no puede ser dependiente de otra persona. Tax questions for students   13. Tax questions for students Usted no puede ser el hijo calificado de otra persona. Tax questions for students   14. Tax questions for students Tiene que haber vivido en los Estados Unidos durante más de la mitad del año. Tax questions for students 15. Tax questions for students Tiene que tener ingresos del trabajo inferiores a:  • $46,227 ($51,567 para casados que presentan una declaración conjunta) si tiene tres o más hijos calificados,  • $43,038 ($48,378 para casados que presentan una declaración conjunta) si tiene dos hijos calificados,  • $37,870 ($43,210 para casados que presentan una declaración conjunta) si tiene un hijo calificado o  • $14,340 ($19,680 para casados que presentan una declaración conjunta) si no tiene un hijo calificado. Tax questions for students ¿Necesito esta Publicación? Algunas personas que presenten el Formulario 1040 tienen que usar la Hoja de Trabajo 1 de esta publicación, en vez de consultar el Paso 2 de las instrucciones para el Formulario 1040, para determinar si pueden reclamar el crédito por ingreso del trabajo (EIC). Tax questions for students Usted se encuentra en esta categoría si alguna de las siguientes situaciones le corresponde para el año 2013. Tax questions for students Presenta el Anexo E (Formulario 1040). Tax questions for students Declara ingresos provenientes del alquiler de bienes inmuebles/muebles que no son utilizados en un oficio o negocio. Tax questions for students Declara ingresos en la línea 21 del Formulario 1040 que provienen del Formulario 8814 (relacionados con la elección de declarar los intereses y dividendos recibidos por un hijo). Tax questions for students Declara una cantidad en la línea 13 del Formulario 1040 que incluye una cantidad del Formulario 4797. Tax questions for students Si ninguna de las situaciones que aparecen anteriormente le corresponde, las instrucciones del formulario de impuestos contienen toda la información que necesita para saber si puede reclamar el crédito por ingreso del trabajo (EIC) y para calcular la cantidad del mismo. Tax questions for students No necesita esta publicación, pero puede leerla para saber si puede reclamar el crédito por ingreso del trabajo (EIC) y para aprender más sobre este crédito. Tax questions for students ¿Hay que Tener un Hijo para Tener Derecho al Crédito por Ingreso del Trabajo (EIC)? No. Tax questions for students Puede reunir los requisitos del crédito por ingreso del trabajo (EIC) aunque no tenga un hijo calificado si usted tiene como mínimo 25 años de edad pero menos de 65 años y tiene ingresos del trabajo inferiores a $14,340 ($19,680 si es casado que presenta una declaración conjunta). Tax questions for students Vea el capítulo 3 para información adicional. Tax questions for students ¿Cómo Calculo la Cantidad del Crédito por Ingreso del Trabajo (EIC)? Si puede reclamar el crédito por ingreso del trabajo (EIC), tiene la opción de solicitar que el IRS le calcule la cantidad del crédito o puede calcularlo usted mismo. Tax questions for students Para calcularlo usted mismo, puede llenar la hoja de trabajo que se encuentra en las instrucciones del formulario que presente. Tax questions for students Para saber cómo solicitar que el IRS le calcule la cantidad del crédito, vea el capítulo 4. Tax questions for students ¿Cómo Puedo Encontrar Rápidamente Información Específica? Puede utilizar el índice para buscar información específica. Tax questions for students En la mayoría de los casos, el índice hace referencia a títulos, tablas u hojas de trabajo. Tax questions for students ¿Hay Ayuda Disponible en Internet? Sí. Tax questions for students Puede utilizar el Asistente EITC en el sitio web www. Tax questions for students irs. Tax questions for students gov/espanol para saber si tiene derecho al crédito. Tax questions for students El Asistente EITC está disponible en español y en inglés. Tax questions for students Qué Hay de Nuevo para el año 2013 La cantidad de ingresos del trabajo ha aumentado. Tax questions for students La cantidad máxima de ingresos que usted puede ganar y aún obtener el crédito ha aumentado. Tax questions for students Tal vez pueda reclamar el crédito si: Tiene tres o más hijos calificados y gana menos de $46,227 ($51,567 si es casado que presenta una declaración conjunta), Tiene dos hijos calificados y gana menos de $43,038 ($48,378 si es casado que presenta una declaración conjunta), Tiene un hijo calificado y gana menos de $37,870 ($43,210 si es casado que presenta una declaración conjunta) o No tiene un hijo calificado y gana menos de $14,340 ($19,680 si es casado que presenta una declaración conjunta). Tax questions for students Además, tiene que tener ingresos brutos ajustados inferiores a la cantidad que le corresponda de la lista anterior. Tax questions for students Para más información, vea los Requisitos 1 y 15. Tax questions for students La cantidad de ingresos de inversiones ha aumentado. Tax questions for students La cantidad máxima de ingresos de inversiones que usted puede ganar y aún obtener el crédito ha aumentado a $3,300. Tax questions for students Vea el Requisito 6 —Tiene que tener ingresos de inversiones de $3,300 o menos . Tax questions for students Recordatorios Aumento del crédito por ingreso del trabajo (EIC) en ciertas declaraciones conjuntas. Tax questions for students  Una persona casada que presente una declaración conjunta podría recibir un crédito mayor que el que recibe otra persona que tenga los mismos ingresos pero con un estado civil diferente para efectos de la declaración. Tax questions for students Por lo tanto, la Tabla del Crédito por Ingreso del Trabajo (EIC) tiene columnas distintas para las personas casadas que presenten una declaración conjunta que para los demás. Tax questions for students Cuando busque su crédito por ingreso del trabajo en la Tabla del Crédito por Ingreso del Trabajo (EIC), asegúrese de usar la columna correcta para su estado civil para efectos de la declaración y el número de hijos que tenga. Tax questions for students El crédito por ingreso del trabajo (EIC) no afecta ciertos pagos de bienestar social. Tax questions for students  Todo reembolso que reciba por el crédito por ingreso del trabajo (EIC) no se considera ingreso al determinar si usted u otra persona tiene derecho a recibir beneficios de los programas de asistencia social que se indican a continuación, ni al determinar la cantidad que usted u otra persona puede recibir de algún programa federal, o algún programa estatal o local que recibe todo o parte de sus fondos de fuentes federales. Tax questions for students Tales programas incluyen los siguientes: Asistencia Temporal para Familias Necesitadas (TANF, por sus siglas en inglés). Tax questions for students Seguro Medicaid. Tax questions for students Seguridad de Ingreso Suplementario (SSI, por sus siglas en inglés). Tax questions for students Programas de Asistencia Suplementaria de Alimentación (SNAP, por sus siglas en inglés) (cupones para alimentos). Tax questions for students Viviendas para personas de bajos ingresos. Tax questions for students Además, cuando determine la elegibilidad, el reembolso no podrá ser contado como una fuente de ingresos, durante por lo menos 12 meses después que usted lo reciba. Tax questions for students Hable con el coordinador de beneficios local para averiguar si su reembolso afectará sus beneficios. Tax questions for students No se olvide del crédito estatal. Tax questions for students  Si reúne los requisitos para reclamar el crédito por ingreso del trabajo (EIC) en la declaración de impuestos federales sobre los ingresos, podría tener también derecho a reclamar un crédito parecido en la declaración de impuestos estatales o locales sobre los ingresos. Tax questions for students Para ver una lista de estados que ofrecen el crédito estatal por ingreso del trabajo, visite www. Tax questions for students irs. Tax questions for students gov/eitc. Tax questions for students En caso de que el IRS cuestione el crédito por ingreso del trabajo (EIC). Tax questions for students  El IRS puede pedirle que entregue documentos para comprobar que usted tiene derecho al crédito por ingreso del trabajo (EIC). Tax questions for students Le informaremos cuáles documentos debe enviarnos. Tax questions for students Éstos pueden incluir actas de nacimiento, expedientes académicos, expedientes médicos, etc. Tax questions for students El proceso para determinar su derecho al crédito demorará su reembolso. Tax questions for students Fotografías de niños desaparecidos. Tax questions for students  El IRS se complace en colaborar con el Centro Nacional de Niños Desaparecidos y Explotados (National Center for Missing and Exploited Children). Tax questions for students Esta publicación puede contener fotografías de niños desaparecidos seleccionadas por el Centro en páginas que de otra manera estarían en blanco. Tax questions for students Usted puede ayudar a que estos niños regresen a su hogar si al mirar sus fotografías los identifica y llama gratis al 1-800-THE-LOST (1-800-843-5678). Tax questions for students Comentarios y sugerencias. Tax questions for students  Agradeceremos sus comentarios acerca de esta publicación, así como sus sugerencias para ediciones futuras. Tax questions for students Nos puede escribir a la dirección siguiente:  Internal Revenue Service Tax Forms and Publications 1111 Constitution Ave. Tax questions for students NW, IR-6526 Washington, DC 20224 Contestamos muchas cartas por teléfono. Tax questions for students Por lo tanto, sería útil que incluyera en la correspondencia su número de teléfono, con el código de área, para llamar durante el día. Tax questions for students Usted nos puede enviar comentarios desde la página web en www. Tax questions for students irs. Tax questions for students gov/formspubs, en inglés. Tax questions for students Pulse sobre “More Information,” (Más información) y seleccionando “Give us feedback. Tax questions for students ” (Proveer comentarios). Tax questions for students Aunque no podemos contestar individualmente cada comentario, agradecemos sus comentarios y sugerencias y los tendremos en cuenta para ediciones futuras de nuestros productos tributarios. Tax questions for students Para pedir formularios y publicaciones. Tax questions for students  Visite www. Tax questions for students irs. Tax questions for students gov/formspubs para descargar formularios y publicaciones, llame al 1-800-829-3676 para pedir formularios y publicaciones o escriba a la dirección a continuación para recibir una respuesta dentro de los 10 días después de recibir su solicitud. Tax questions for students  Internal Revenue Service 1201 N. Tax questions for students Mitsubishi Motorway Bloomington, IL 61705-6613 Preguntas sobre los impuestos. Tax questions for students  Si tiene una pregunta sobre los impuestos, verifique la información disponible en IRS. Tax questions for students gov/espanol o llame al 1-800-829-1040. Tax questions for students No podemos contestar preguntas sobre impuestos enviadas a ninguna de las dos direcciones anteriores. Tax questions for students Prev  Up  Next   Home   More Online Publications

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The Tax Questions For Students

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