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Leave charitable appraisals to the pros

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The IRS has tightened the tax rules for substantiating charitable gifts of property.

For instance, you must obtain a qualified appraisal of the property if you’re claiming a deduction exceeding $5,000.

Strategy: Use a “qualified appraiser,” as required by the Pension Protection Act of 2006. The IRS spells out the rules in IRS Notice 2006-96.

Specifically, a qualified appraiser must:

  • Be certified by a professional organization or meet education and experience requirements established by the Treasury Department.
  • Be familiar with how to evaluate the type of property being donated.
  • Offer appraisals for a fee on a regular basis.
  • Comply with any other requirements in the prevailing tax regulations. (IRS Regulation 1.170A-13(c)(5))

Appraisers must declare that they meet the requirements for being a “qualified appraiser.” In addition, they can’t have been barred from practice before the IRS in the three years preceding the appraisal.

For returns filed after Feb. 16, 2007, appraisers must declare that they understand that they face civil penalties for inadequate appraisals.

The new pension law also imposes a tax penalty for excessive valuations that a qualified appraiser should have known would be used on a tax return.

Tip: Those rules don’t apply to donations of publicly traded securities. You can use the quoted market prices to determine the fair-market value.

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