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Donation of rare books to create a new Fund

  • 1.  Donation of rare books to create a new Fund

    Posted 12-01-2021 03:45 PM
    We have a donor who would like to donate some rare books for the purpose of selling them and have the proceeds applied to the establishment of a new fund. I believe this would be a Gift-in-Kind, unrelated use (and we would have to complete Form 8282)? Would there be advantages for the donor to sell the books at an auction and then give us the proceeds? We have had donors go directly to an auction house and have them sell a valuable item "on our behalf". When we received the proceeds, I believe we credited the donor with the net amount received from the auction house. I haven't been able to find any previous threads relating specifically to this type of donation which is different from one made for the purpose of a charity auction. 
    thanks,
    Robert

    ------------------------------
    Robert Laity
    Stewardship and Development Services Manager
    Bard College
    laity@bard.edu
    ------------------------------


  • 2.  RE: Donation of rare books to create a new Fund

    Posted 12-01-2021 03:50 PM
    Robert, you really cannot provide advice to your donor regarding what makes the most sense from a tax perspective.  That's got to be between them and their tax people.

    You are correct that this would be an in-kind donation.  You are also correct that it would be unrelated use that could reduce their deduction (depending on their original cost basis).  You are also correct that an 8282 might be needed - but perhaps not depending on the value and whether the donor files an 8283.

    If the donor opts to sell the books, they might be able to raise more money than they can deduct.  But then they would have to pay taxes on the income.  On the other hand, if they are not concerned about making money and don't want to pay taxes, then they might be better off taking whatever deduction they can get and letting you sell them to fund the fund!

    But let them make these decisions!

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987






  • 3.  RE: Donation of rare books to create a new Fund

    Posted 12-01-2021 03:59 PM
    Thank you John,
    Indeed, we never give tax advice to our donors. It is my understanding that the initial group of books would definitely be above $5,000 and require a signed 8283.
    regards,
    Robert

    ------------------------------
    Robert Laity
    Stewardship and Development Services Manager
    Bard College
    laity@bard.edu
    ------------------------------



  • 4.  RE: Donation of rare books to create a new Fund

    Posted 12-01-2021 04:17 PM

    I agree with you and with John, of course, about this being an unrelated use in-kind gift.

     

    Congress addressed the specific case of unrelated-use contributed motor vehicles, boats, and airplanes because the donors were claiming a deduction significantly larger than the benefit to the organization.  But that's a special set of circumstances, because the donor's basis is almost always *higher* than the FMV with depreciated vehicles.  It's a little hard to see how the donor would benefit more from the in-kind donation than from the sale and donation of the proceeds in this case, but that gets down into the details about the books and the basis and the FMV and income and so on, and the donor and their tax counsel would need to evaluate that.  (And the tax code only applies the special treatment to gifts of those sorts of vehicles.)

     

    One other factor, that you likely already have in view, is whether by accepting the in-kind contribution, it becomes *your* responsibility to manage the sale.  It you're set up to do that, it's probably no big deal, esp. if it would be a relief for the donor not to have to take it on.  If you're not set up to do that, it might be a more significant implicit cost of accepting the gift

     

    My US$0.02 worth; the usual disclaimers apply.

     

    Good luck!

     

    Alan

     

    Alan S. Hejnal   

    Data Quality Manager

     

    SNAGHTML5cbfa34

     

    Smithsonian Institution - Office of Advancement

    600 Maryland Ave SW Ste 600E

    PO Box 37012, MRC 527

    Washington, DC 20013-7012

    Voice: 202-633-8754 | Email: HejnalA@si.edu                                                                                                                                            

     






  • 5.  RE: Donation of rare books to create a new Fund

    Posted 12-02-2021 07:09 AM

    Hi John, 

    Can you clarify this statement related to this thread? 

    "You are correct that this would be an in-kind donation.  You are also correct that it would be unrelated use that could reduce their deduction (depending on their original cost basis).  You are also correct that an 8282 might be needed - but perhaps not depending on the value and whether the donor files an 8283."

    Are you saying in the italicized that if a donee organization sells the donated property within three years that: a) filing an 8282 is not required if donor has only completed Section A of the 8283 (property gifts of less than $5,000); or b) filing an 8282 is not required if donor never submitted an 8283 to the donee organization for signature/gift verification in the first place? 

    I researched this question recently, specifically in context of scenario B) above, and found this guidance from Alan Henjal from a AdvServ post in 2020: 

    "A policy to only file an 8282 if your donor did an 8283 is a policy that will lead to non-compliance with your IRS obligations, at the very least. You need to do an 8282 on disposal irrespective of the 8283. It's certainly with considering valuations you signed on to in the 8283 when doing the 8282 though."

    I understand the question may be as much for Alan as you... 

    Thanks, 

    Tom 



    ------------------------------
    Tom Yates
    Temple University
    Executive Director of Gift Planning
    215-926-2545
    tyates@temple.edu
    ------------------------------



  • 6.  RE: Donation of rare books to create a new Fund

    Posted 12-02-2021 07:31 AM
    I agree with Alan.  I have always filed an 8282 when the gift was worth $5,000 or more and should have been reported on an 8283.  I do so even if I am not certain whether an 8283 was prepared and filed.

    It is entirely possible that an 8283 was filed without my knowledge.  I know that some institutions have policies that state they will file an 8282 only when they have executed an 8283.  But I go with Alan's comments and do not want to risk noncompliance.

    My original comment applied more to cases where an 8283 is never required as might be the case when a foreign donor or entity that cannot claim charitable donations is involved.

    John

    John H. Taylor 
    919.816.5903 (Cell/Text)

    Big Ideas; Small Keyboard





  • 7.  RE: Donation of rare books to create a new Fund

    Posted 12-02-2021 08:52 AM

    It's also worth noting--though this doesn't apply to your case--that if an institution has a policy of only filing an 8282 if they signed an 8283, it is vital that the institution has a clear and effective policy about who is authorized to sign an 8283 on behalf of the institution.  It you don't a centralized responsibility, the "institution" might well have signed and 8283 but that's only known to one person in some department, making it hard to manage the 8282 obligations.

     

    Having a centralized process for signing any 8283s also enables the subsequent steps of the process: tracking the 8283s have been signed, designating someone to manage the 8283/8282 process, ensuring the people who have oversight of the property (say, the department for whose use the property was donated) understand their responsibility to notify the coordinating individual if the property is sold or otherwise disposed of, and following up periodically about the status of the contributed property--as well as actually filing any 8282s that are required.

     

    Even if you always file an 8282 regardless of whether an 8283 was signed by the organization, you still have to know that the property was donated, and that it was then disposed of!

     

    My US$0.02 worth; the usual disclaimers apply.

     

    Good luck!

     

    Alan

     

    Alan S. Hejnal   

    Data Quality Manager

     

    SNAGHTML5cbfa34

     

    Smithsonian Institution - Office of Advancement

    600 Maryland Ave SW Ste 600E

    PO Box 37012, MRC 527

    Washington, DC 20013-7012

    Voice: 202-633-8754 | Email: HejnalA@si.edu                                                                                                                                            

     






  • 8.  RE: Donation of rare books to create a new Fund

    Posted 12-02-2021 09:00 AM
    Great advice, Alan.  And even if you have such a policy, that does not mean it is always followed :-).

    At Duke, we had such a policy but, sadly, many doctors thought they were exempt.  It took some very strong language from their boss's boss to get them to follow the rules.  But even so, I always had a feeling in the back of my head that with over 18,000 employees, someone might not have read the policy.

    I also had one client where they discovered that a donor had executed an 8283 fraudulently by signing the form.  Needless to say, an IRS audit of that donor did discover the fraud and there were repercussions to that individual.

    Regardless, all of this is why I advocate for filing an 8282 when I believe an 8283 should have been filed if we dispose of an in-kind gift valued at $5,000+ within three years, even if I never saw one - no matter what our policies stated.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987







  • 9.  RE: Donation of rare books to create a new Fund

    Posted 12-02-2021 09:20 AM
    Thank you all for your insight. We have Policies and Procedures, but they are only good if they are followed!
    It is a constant struggle to wrangle all of the players. The 8283 form is important for our office as well as the Finance office, since they report some non-cash charitable gifts on our 990. 
    Circling back to one scenario I have dealt with in the past that I mentioned, what are the implications if we find out a donor went directly to an auction house and had a valuable item sold "on our behalf"? The donor took the item to the auction house, it was sold, and then the auction house issued a check directly to us. Is this a cash donation from the donor? A gift in kind with a fmv of the net value realized? Apart from this probably not being the way to go, what does one do with a situation like this?
    Robert

    ------------------------------
    Robert Laity
    Stewardship and Development Services Manager
    Bard College
    laity@bard.edu
    ------------------------------



  • 10.  RE: Donation of rare books to create a new Fund

    Posted 12-02-2021 09:30 AM

    I would offer the analogy to gifts of securities: if the donor transfers the securities to you or your agent, then there is a gift pf property, but if the donor or the donor's agent sold the property and sent you the proceeds, then that is a cash gift.

     

    If you didn't accept the property and have control over it, but only received the proceeds, it wouldn't be a gift of the property.

     

    My US$0.02 worth; the usual disclaimers apply.

     

    Good luck!

     

    Alan

     

    Alan S. Hejnal   

    Data Quality Manager

     

    SNAGHTML5cbfa34

     

    Smithsonian Institution - Office of Advancement

    600 Maryland Ave SW Ste 600E

    PO Box 37012, MRC 527

    Washington, DC 20013-7012

    Voice: 202-633-8754 | Email: HejnalA@si.edu