Donating works of art to Charity
Several different tax
rules may come into play in connection when donating works of art to
charity. First of all, a charitable contribution of a work of art is
subject to reduction if the charity's use of the work of art is unrelated
to the purpose or function that is the basis for its qualification as a
tax-exempt organization. The reduction equals the amount of capital gain
you would have realized had you sold the property instead of giving it to
Example (1). You bought a painting five years ago for
$10,000 and it's now worth $20,000. You contribute it to a hospital. Your
deduction is limited to $10,000 because the hospital's use of the painting
is unrelated to its charitable function and you would have had a $10,000
long-term capital gain had you sold it.
Example (2). Now assume
you donate the painting to an art museum. Here, your deduction is $20,000.
One or more substantiation rules may come into play when you donate a
work of art. First, if you claim a deduction of $250 or more, you must get
and keep an acknowledgement of the contribution from the donee
If you claim a deduction in excess of $500, you
generally must maintain written records that include information about the
donee; a description of the donated property; the fair market value at the
time of contribution, the method of determining it and a copy of the
signed appraisal, if any; a description of how and when you acquired the
property; and the cost or other basis of the property. You also must
A of Form 8283 and attach it to your tax return.
Where the claimed value of the property exceeds $5,000, you must
have a qualified appraisal of the property, i.e., an appraisal done by a
qualified appraisal not earlier than 60 days before the contribution date
and that meets numerous other requirements. You include information about
these donations on section B of Form 8283, which you file with your tax
return. If total deduction for art is $20,000 or more, you must attach a
complete copy of the signed appraisal. If an item of art has been
appraised at $50,000 or more you can ask IRS to issue a "Statement of
Value" which can be used to substantiate the value.
your deduction may be limited to 20%, 30% or 50% of your contribution base
or an even lesser amount. This base, which usually is your adjusted gross
income, varies depending on the type of organization involved and whether
or not the deduction of the work of art had to be reduced because of the
unrelated use rule explained above. The amount not deductible on account
of a ceiling may be deductible in a later year under carryover rules.