Charitable contributions of property.

Many charitable gifts are made in the form of property, be it clothing to Goodwill Industries or corporate stock to an exempt organization. As noted in last month's column, the 1993 Omnibus Budget Reconciliation Act's changes to the charitable contribution rules make it more important than ever to maintain proper records--especially for such contributions.

NONCASH CONTRIBUTIONS

If the amount of a taxpayer's deduction for noncash contributions is less than $500, the taxpayer needs only a receipt from the charitable organization acknowledging the contribution and providing the organization's name, the date and location of the contribution and a reasonably detailed description of the property. Generally, the taxpayer should keep all this information, as well as the property's basis and fair market value, in his or her tax records.

If a taxpayer claims a deduction over $500 but not over $5,000, he or she must get and keep a receipt from the charitable organization. The taxpayer's written records must include the same information required for smaller donations as well as information on how the property was obtained by the taxpayer (for example, by purchase, bequest, gift, inheritance or exchange), the approximate date obtained and the property's cost basis. (If the taxpayer has reasonable reasons for not being able to provide the information on either the property's acquisition date or cost basis, he or she should attach an explanation to the return.)

If a taxpayer claims a deduction of over $5,000 for a charitable contribution of one property item or a group of similar property items, all the information required for smaller donations must be maintained. In addition, the taxpayer must obtain a qualified appraisal made by a qualified appraiser and attach an appraisal summary to his or her tax return.

Publicly traded stock. Neither a qualified appraisal nor an appraisal summary is required for securities listed daily on a national stock exchange or regularly traded on a national or regional over-the-counter market or for mutual funds for which quotations are published daily in general-circulation newspapers.

Nonpublicly traded stock. Qualified appraisals are not required for deductions of $10,000 or less of nonpublicly traded stock. However, a partially completed appraisal summary signed by the donee must be attached to his or her tax return.

QUALIFIED APPRAISALS

A qualified appraisal must be obtained before the due date of the return on which the deduction is claimed and must

* Relate to an appraisal made not earlier than 60 days before the date of the appraised property's contribution.

* Be prepared, signed and dated by a qualified appraiser.

* Include a description of the property; its physical condition; the date of contribution; any terms of an agreement by the donor concerning the property's use, sale or disposition; the appraiser's name, address and taxpayer identification number; the appraiser's qualifications, including background, experience and education; a statement that the appraisal was prepared for income tax purposes; the date of the valuation; the property's appraised fair market value on the contribution date; the method used to value the property; and the specific basis for the valuation.

Prohibited appraisal fee. No part of the fee paid for an appraisal can be based on a percentage of the appraised value of the property; that is, it cannot be a contingent fee (or other similar) arrangement.

QUALIFIED APPRAISERS

A qualified appraiser is an individual who holds himself or herself out to the public as an appraiser or who regularly performs appraisals and is qualified to appraise property because of his or her qualifications. Certain individuals, however, may not act as qualified appraisers:

* The property's donor (or the taxpayer who claims the deduction).

* The property's donee.

* A party to the transaction with certain very specific exceptions).

* Any person employed by, married to or related to any of the above persons.

* An appraiser who regularly appraises for the donor, donee or party to the transaction and does not perform a majority of his or her appraisals for other persons.

For a discussion of qualified appraisals and other developments, see the Tax Clinic, edited by Stuart Josephs, in the May 1994 issue of The Tax Adviser.