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Original Message:
Re: Getting rid of your timeshare (by Dr. K.):
With all due respect to Dave McClintock, CPA, I would prefer to trust what the IRS publishes directly in their regulations and publications. Unfortunately, jayjay, donp196, and others never bother to read the actual law as presented by the IRS. If you want a CPA’s opinion, please get it, but make sure you give these direct IRS quotes to them for review.
Here is what the IRS says:
“FMV is the price a willing, knowledgeable buyer would pay a willing, knowledgeable seller when neither has to buy or sell.” (Instructions for Form 8283 - Noncash Charitable Contributions)
“Factors. In making and supporting the valuation of property, all factors affecting value are relevant and must be considered. These include: • The cost or selling price of the item, • Sales of comparable properties, • Replacement cost, and • Opinions of experts.” (Publication 561 - Determining the Value of Donated Property)
“Unusual Market Conditions For example, liquidation sale prices usually do not indicate the FMV. Also, sales of stock under unusual circumstances, such as sales of small lots, forced sales, and sales in a restricted market, may not represent the FMV.” (Publication 561 - Determining the Value of Donated Property)
“Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser. . .” (Publication 561 - Determining the Value of Donated Property)
"Appraisals Appraisals are not necessary for items of property for which you claim a deduction of $5,000 or less. " (Publication 561 - Determining the Value of Donated Property)
“1. Comparable Sales For each comparable sale, the appraisal must include the names of the buyer and seller, the deed book and page number, the date of sale and selling price, a property description, the amount and terms of mortgages, property surveys, the assessed value, the tax rate, and the assessor’s appraised FMV. . . . Only comparable sales having the least adjustments in terms of items and/or total dollar adjustments should be considered as comparable to the donated property.” (Publication 561 - Determining the Value of Donated Property)
My comments - In simple terms the IRS says FMV is between a willing, knowledgeable buyer and seller, neither of which has to sell and a distressed sale is NOT indicative of FMV. Next, only if the donor is taking a greater than $5,000 deduction is an appraisal required and that appraisal must include ALL sales for which specific detailed information can be obtained. Distressed sales at $1 on eBay rarely give enough information to qualify as FMV comparables. Generally, only resort sales have enough information to be accepted by the IRS for appraisal purposes.
“Penalty 20% penalty. The penalty is 20% of the underpayment of tax related to the overstatement if: • The value or adjusted basis claimed on the return is 200% (150% for returns filed after August 17, 2006) or more of the correct amount, and • You underpaid your tax by more than $5,000 because of the overstatement. 40% penalty. The penalty is 40%, rather than 20%, if: • The value or adjusted basis claimed on the return is 400% (200% for returns filed after August 17, 2006) or more of the correct amount, and • You underpaid your tax by more than $5,000 because of the overstatement.” (Publication 561 - Determining the Value of Donated Property)
My comments - Finally, contrary to the dire warnings of illegal activity and consequences, the IRS doesn’t deal with what a charity gives as donation credit. They are concerned with what the taxpayer claims. Importantly, look at the second half of each penalty section, “• You underpaid your tax by more than $5,000 because of the overstatement.” Even with a $70,000 income you would have had to claim more than a $20,000 deduction from the donation to qualify for any penalty at all.
Please read the IRS regulations yourself and consider the source for unsubstantiated rants and raves of imbeciles found in this thread.