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Free State Filing Online

Free state filing online 3. Free state filing online   Savings Incentive Match Plans for Employees (SIMPLE) Table of Contents Introduction What Is a SIMPLE Plan?Eligible Employees How Are Contributions Made? How Much Can Be Contributed on Your Behalf?Matching contributions less than 3%. Free state filing online Traditional IRA mistakenly moved to SIMPLE IRA. Free state filing online When Can You Withdraw or Use Assets?Are Distributions Taxable? Introduction This chapter is for employees who need information about savings incentive match plans for employees (SIMPLE plans). Free state filing online It explains what a SIMPLE plan is, contributions to a SIMPLE plan, and distributions from a SIMPLE plan. Free state filing online Under a SIMPLE plan, SIMPLE retirement accounts for participating employees can be set up either as: Part of a 401(k) plan, or A plan using IRAs (SIMPLE IRA). Free state filing online This chapter only discusses the SIMPLE plan rules that relate to SIMPLE IRAs. Free state filing online See chapter 3 of Publication 560 for information on any special rules for SIMPLE plans that do not use IRAs. Free state filing online If your employer maintains a SIMPLE plan, you must be notified, in writing, that you can choose the financial institution that will serve as trustee for your SIMPLE IRA and that you can roll over or transfer your SIMPLE IRA to another financial institution. Free state filing online See Rollovers and Transfers Exception, later under When Can You Withdraw or Use Assets. Free state filing online What Is a SIMPLE Plan? A SIMPLE plan is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees. Free state filing online See chapter 3 of Publication 560 for information on the requirements employers must satisfy to set up a SIMPLE plan. Free state filing online A SIMPLE plan is a written agreement (salary reduction agreement) between you and your employer that allows you, if you are an eligible employee (including a self-employed individual), to choose to: Reduce your compensation (salary) by a certain percentage each pay period, and Have your employer contribute the salary reductions to a SIMPLE IRA on your behalf. Free state filing online These contributions are called salary reduction contributions. Free state filing online All contributions under a SIMPLE IRA plan must be made to SIMPLE IRAs, not to any other type of IRA. Free state filing online The SIMPLE IRA can be an individual retirement account or an individual retirement annuity, described in chapter 1. Free state filing online Contributions are made on behalf of eligible employees. Free state filing online (See Eligible Employees below. Free state filing online ) Contributions are also subject to various limits. Free state filing online (See How Much Can Be Contributed on Your Behalf , later. Free state filing online ) In addition to salary reduction contributions, your employer must make either matching contributions or nonelective contributions. Free state filing online See How Are Contributions Made , later. Free state filing online You may be able to claim a credit for contributions to your SIMPLE plan. Free state filing online For more information, see chapter 4. Free state filing online Eligible Employees You must be allowed to participate in your employer's SIMPLE plan if you: Received at least $5,000 in compensation from your employer during any 2 years prior to the current year, and Are reasonably expected to receive at least $5,000 in compensation during the calendar year for which contributions are made. Free state filing online Self-employed individual. Free state filing online   For SIMPLE plan purposes, the term employee includes a self-employed individual who received earned income. Free state filing online Excludable employees. Free state filing online   Your employer can exclude the following employees from participating in the SIMPLE plan. Free state filing online Employees whose retirement benefits are covered by a collective bargaining agreement (union contract). Free state filing online Employees who are nonresident aliens and received no earned income from sources within the United States. Free state filing online Employees who would not have been eligible employees if an acquisition, disposition, or similar transaction had not occurred during the year. Free state filing online Compensation. Free state filing online   For purposes of the SIMPLE plan rules, your compensation for a year generally includes the following amounts. Free state filing online Wages, tips, and other pay from your employer that is subject to income tax withholding. Free state filing online Deferred amounts elected under any 401(k) plans, 403(b) plans, government (section 457) plans, SEP plans, and SIMPLE plans. Free state filing online Self-employed individual compensation. Free state filing online   For purposes of the SIMPLE plan rules, if you are self-employed, your compensation for a year is your net earnings from self-employment (Schedule SE (Form 1040), Section A, line 4, or Section B, line 6) before subtracting any contributions made to a SIMPLE IRA on your behalf. Free state filing online   For these purposes, net earnings from self-employment include services performed while claiming exemption from self-employment tax as a member of a group conscientiously opposed to social security benefits. Free state filing online How Are Contributions Made? Contributions under a salary reduction agreement are called salary reduction contributions. Free state filing online They are made on your behalf by your employer. Free state filing online Your employer must also make either matching contributions or nonelective contributions. Free state filing online Salary reduction contributions. Free state filing online   During the 60-day period before the beginning of any year, and during the 60-day period before you are eligible, you can choose salary reduction contributions expressed either as a percentage of compensation, or as a specific dollar amount (if your employer offers this choice). Free state filing online You can choose to cancel the election at any time during the year. Free state filing online   Salary reduction contributions are also referred to as “elective deferrals. Free state filing online ”   Your employer cannot place restrictions on the contributions amount (such as by limiting the contributions percentage), except to comply with the salary reduction contributions limit, discussed under How Much Can Be Contributed on Your Behalf, later. Free state filing online Matching contributions. Free state filing online   Unless your employer chooses to make nonelective contributions, your employer must make contributions equal to the salary reduction contributions you choose (elect), but only up to certain limits. Free state filing online See How Much Can Be Contributed on Your Behalf below. Free state filing online These contributions are in addition to the salary reduction contributions and must be made to the SIMPLE IRAs of all eligible employees (defined earlier) who chose salary reductions. Free state filing online These contributions are referred to as matching contributions. Free state filing online   Matching contributions on behalf of a self-employed individual are not treated as salary reduction contributions. Free state filing online Nonelective contributions. Free state filing online   Instead of making matching contributions, your employer may be able to choose to make nonelective contributions on behalf of all eligible employees. Free state filing online These nonelective contributions must be made on behalf of each eligible employee who has at least $5,000 of compensation from your employer, whether or not the employee chose salary reductions. Free state filing online   One of the requirements your employer must satisfy is notifying the employees that the election was made. Free state filing online For other requirements that your employer must satisfy, see chapter 3 of Publication 560. Free state filing online How Much Can Be Contributed on Your Behalf? The limits on contributions to a SIMPLE IRA vary with the type of contribution that is made. Free state filing online Salary reduction contributions limit. Free state filing online   Salary reduction contributions (employee-chosen contributions or elective deferrals) that your employer can make on your behalf under a SIMPLE plan are limited to $12,000 for 2013. Free state filing online The limitation remains at $12,000 for 2014. Free state filing online If you are a participant in any other employer plans during 2013 and you have elective salary reductions or deferred compensation under those plans, the salary reduction contributions under the SIMPLE plan also are included in the annual limit of $17,500 for 2013 on exclusions of salary reductions and other elective deferrals. Free state filing online You, not your employer, are responsible for monitoring compliance with these limits. Free state filing online Additional elective deferrals can be contributed to your SIMPLE plan if: You reached age 50 by the end of 2013, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions, such as the regular annual limit. Free state filing online The most that can be contributed in additional elective deferrals to your SIMPLE plan is the lesser of the following two amounts. Free state filing online $2,500 for 2013, or Your compensation for the year reduced by your other elective deferrals for the year. Free state filing online The additional deferrals are not subject to any other contribution limit and are not taken into account in applying other contribution limits. Free state filing online The additional deferrals are not subject to the nondiscrimination rules as long as all eligible participants are allowed to make them. Free state filing online Matching employer contributions limit. Free state filing online   Generally, your employer must make matching contributions to your SIMPLE IRA in an amount equal to your salary reduction contributions. Free state filing online These matching contributions cannot be more than 3% of your compensation for the calendar year. Free state filing online See Matching contributions less than 3% below. Free state filing online Example 1. Free state filing online In 2013, Joshua was a participant in his employer's SIMPLE plan. Free state filing online His compensation, before SIMPLE plan contributions, was $41,600 ($800 per week). Free state filing online Instead of taking it all in cash, Joshua elected to have 12. Free state filing online 5% of his weekly pay ($100) contributed to his SIMPLE IRA. Free state filing online For the full year, Joshua's salary reduction contributions were $5,200, which is less than the $12,000 limit on these contributions. Free state filing online Under the plan, Joshua's employer was required to make matching contributions to Joshua's SIMPLE IRA. Free state filing online Because his employer's matching contributions must equal Joshua's salary reductions, but cannot be more than 3% of his compensation (before salary reductions) for the year, his employer's matching contribution was limited to $1,248 (3% of $41,600). Free state filing online Example 2. Free state filing online Assume the same facts as in Example 1 , except that Joshua's compensation for the year was $408,163 and he chose to have 2. Free state filing online 94% of his weekly pay contributed to his SIMPLE IRA. Free state filing online In this example, Joshua's salary reduction contributions for the year (2. Free state filing online 94% × $408,163) were equal to the 2013 limit for salary reduction contributions ($12,000). Free state filing online Because 3% of Joshua's compensation ($12,245) is more than the amount his employer was required to match ($12,000), his employer's matching contributions were limited to $12,000. Free state filing online In this example, total contributions made on Joshua's behalf for the year were $24,000 ($12,000 (Joshua's contributions) + $12,000 (matching contributions)), the maximum contributions permitted under a SIMPLE IRA for 2013. Free state filing online Matching contributions less than 3%. Free state filing online   Your employer can reduce the 3% limit on matching contributions for a calendar year, but only if: The limit is not reduced below 1%, The limit is not reduced for more than 2 years out of the 5-year period that ends with (and includes) the year for which the election is effective, and Employees are notified of the reduced limit within a reasonable period of time before the 60-day election period during which they can enter into salary reduction agreements. Free state filing online   For purposes of applying the rule in item (2) in determining whether the limit was reduced below 3% for the year, any year before the first year in which your employer (or a former employer) maintains a SIMPLE IRA plan will be treated as a year for which the limit was 3%. Free state filing online If your employer chooses to make nonelective contributions for a year, that year also will be treated as a year for which the limit was 3%. Free state filing online Nonelective employer contributions limit. Free state filing online   If your employer chooses to make nonelective contributions, instead of matching contributions, to each eligible employee's SIMPLE IRA, contributions must be 2% of your compensation for the entire year. Free state filing online For 2013, only $255,000 of your compensation can be taken into account to figure the contribution limit. Free state filing online   Your employer can substitute the 2% nonelective contribution for the matching contribution for a year if both of the following requirements are met. Free state filing online Eligible employees are notified that a 2% nonelective contribution will be made instead of a matching contribution. Free state filing online This notice is provided within a reasonable period during which employees can enter into salary reduction agreements. Free state filing online Example 3. Free state filing online Assume the same facts as in Example 2 , except that Joshua's employer chose to make nonelective contributions instead of matching contributions. Free state filing online Because his employer's nonelective contributions are limited to 2% of up to $255,000 of Joshua's compensation, his employer's contribution to Joshua's SIMPLE IRA was limited to $5,100. Free state filing online In this example, total contributions made on Joshua's behalf for the year were $17,100 (Joshua's salary reductions of $12,000 plus his employer's contribution of $5,100). Free state filing online Traditional IRA mistakenly moved to SIMPLE IRA. Free state filing online   If you mistakenly roll over or transfer an amount from a traditional IRA to a SIMPLE IRA, you can later recharacterize the amount as a contribution to another traditional IRA. Free state filing online For more information, see Recharacterizations in chapter 1. Free state filing online Recharacterizing employer contributions. Free state filing online   You cannot recharacterize employer contributions (including elective deferrals) under a SEP or SIMPLE plan as contributions to another IRA. Free state filing online SEPs are discussed in chapter 2 of Publication 560. Free state filing online SIMPLE plans are discussed in this chapter. Free state filing online Converting from a SIMPLE IRA. Free state filing online   Generally, you can convert an amount in your SIMPLE IRA to a Roth IRA under the same rules explained in chapter 1 under Converting From Any Traditional IRA Into a Roth IRA . Free state filing online    However, you cannot convert any amount distributed from the SIMPLE IRA during the 2-year period beginning on the date you first participated in any SIMPLE IRA plan maintained by your employer. Free state filing online When Can You Withdraw or Use Assets? Generally, the same distribution (withdrawal) rules that apply to traditional IRAs apply to SIMPLE IRAs. Free state filing online These rules are discussed in chapter 1. Free state filing online Your employer cannot restrict you from taking distributions from a SIMPLE IRA. Free state filing online Are Distributions Taxable? Generally, distributions from a SIMPLE IRA are fully taxable as ordinary income. Free state filing online If the distribution is an early distribution (discussed in chapter 1), it may be subject to the additional tax on early distributions. Free state filing online See Additional Tax on Early Distributions, later. Free state filing online Rollovers and Transfers Exception Generally, rollovers and trustee-to-trustee transfers are not taxable distributions. Free state filing online Two-year rule. Free state filing online   To qualify as a tax-free rollover (or a tax-free trustee-to-trustee transfer), a rollover distribution (or a transfer) made from a SIMPLE IRA during the 2-year period beginning on the date on which you first participated in your employer's SIMPLE plan must be contributed (or transferred) to another SIMPLE IRA. Free state filing online The 2-year period begins on the first day on which contributions made by your employer are deposited in your SIMPLE IRA. Free state filing online   After the 2-year period, amounts in a SIMPLE IRA can be rolled over or transferred tax free to an IRA other than a SIMPLE IRA, or to a qualified plan, a tax-sheltered annuity plan (section 403(b) plan), or deferred compensation plan of a state or local government (section 457 plan). Free state filing online Additional Tax on Early Distributions The additional tax on early distributions (discussed in chapter 1) applies to SIMPLE IRAs. Free state filing online If a distribution is an early distribution and occurs during the 2-year period following the date on which you first participated in your employer's SIMPLE plan, the additional tax on early distributions is increased from 10% to 25%. Free state filing online If a rollover distribution (or transfer) from a SIMPLE IRA does not satisfy the 2-year rule, and is otherwise an early distribution, the additional tax imposed because of the early distribution is increased from 10% to 25% of the amount distributed. Free state filing online Prev  Up  Next   Home   More Online Publications
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Face-to-Face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City  Street Address  Days/Hours of Service  Telephone* 
Boise  550 W. Fort St.
Boise, ID 83724 

Monday-Friday - 8:30 a.m.- 4:30 p.m.

 

Services Provided

(208) 387-2847 
Idaho Falls  1820 E. 17th St.
Idaho Falls, ID 83404 

Monday-Friday - 8:30 a.m.- 4:30 p.m. 
(Closed for lunch 12:00 noon-1:00 p.m.) 

 

Services Provided

(208) 523-8041 
Pocatello  275 S. 5th Ave.
Pocatello, ID 83201 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:00 noon-1:00 p.m.)

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(208) 236-6795 

* Note: The phone numbers in the chart above are not toll free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).

For information on where to file your tax return please see Where to File Addresses.

The Taxpayer Advocate Service: Call 208-363-8900 in the Boise area or 1-877-777-4778 elsewhere, or see  Publication 1546, The Taxpayer Advocate Service of the IRS. For further information, see Tax Topic 104.

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
550 W. Fort Street, MS 6610BOI
Boise, ID 83724

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The Free State Filing Online

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