Business owners may desire to donate a portion of their privately held business to charity. As such, a tax deduction in the amount of the contribution can be taken in the year the donation is made. Per Internal Revenue Service (IRS) requirements, substantiation of the amount of charitable contribution must be made through an appraisal prepared by a qualified appraiser. Since these tax deductions are carefully monitored by the IRS, you need to rely on a qualified appraiser, like those at Doeren Mayhew, to assist you in providing an accurate and thorough qualified appraisal.
If an individual is claiming a deduction for a charitable contribution of a privately held business of $10,000 or greater, an appraisal by a qualified appraiser is required and Form 8283 should be included with the individual tax return. For any charitable contributions of a privately held business of $500,000 or greater, a copy of the qualified appraisal needs to be attached to the income tax return.
In order to become a qualified appraiser as defined by the IRS, the appraiser must meet the following:
Having a qualified appraiser determine the fair market value of the charitable contribution is essential to diminish the risk of incurring a penalty. The penalties imposed by the IRS to the individual taxpayer for misstating the value of a charitable contribution of an interest in a privately held business are as follows:
The penalty is 20 percent of the underpayment of tax related to the overstatement if:
The penalty is 40 percent, rather than 20 percent, if:
The question often arises if a prior appraisal of a privately held business can be used as a qualified appraisal for a charitable contribution. The IRS has a 60-day rule which requires a qualified appraisal to have a valuation date of not more than 60 days before the date of contribution of the appraised property.
The IRS provides a detailed list of information required to be included within a qualified appraisal report for charitable contributions, such as:
Doeren Mayhew’s team of qualified appraiser can help prepare a qualified appraisal report to reduce the risk of incurring a penalty due to misstating the value of the charitable contribution. Our reports will deliver the accuracy you need and meet all the IRS requirements to get the tax deductions you deserve for your generous charitable contributions. Contact our valuation specialists to get your contributions qualified today!
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
A quick registration is required to view our resources.
You will only be asked to do this one time (unless you don't save your browser cookies).