On Oct 7, 2021, at 8:48 AM, John Taylor <email@example.com> wrote:
See IRS Publication 561 for in-kind donation and valuation issues.JohnJohn H. Taylor 919.816.5903 (Cell/Text)Big Ideas; Small Keyboard
I realize that there are several statements in IRS Publication 526 regarding donors not being able to deduct the value of their time or services. However, is there a succinct statement or paragraph somewhere in IRS documentation that connects this with the donation of gifts-in-kind? Or any suggestions on other language that can be used to educate donors?
Specifically, we are a social service agency and have quilters donate handmade quilts, which they assign a FMV equivalent to what they think they can sell the quilt for at a craft fair. I have had conversation with some of these quilters but they don't seem to understand that they are over-valuing their quilts as a donation.
Thank you! Karen
Thank you, John, for your input; it is most appreciated! Unfortunately, Pub 561 isn't much help as it doesn't address the excluding the creator's time in determining FMV. As we provide shelter beds and clothing to our clients, quilt donations do support our mission and provide budget relief. Otherwise, we would be purchasing bedding… but not a quilt that a donor has valued at $1,000. (These GIKs are not intended for our fundraising auctions.)
We do follow IRS guidelines for acknowledging gifts-in-kind and all GIKs received are reported on our 990. Those inflated FMVs do skew our reporting and it does bother me in principal that donors inflate the FMV of their donation. The worst example I have encountered of FMV inflation was a donor who made three separate clothing donations and assigned a FMV of $4,999 to each donation. Of course, the donor-provided FMV is between them and their tax preparer/IRS, but in principal, inflated FMV is one of my pet peeves! (Thanks for listening!)