Charitable Donations Donating your Estate Jewelry Appraisal Information

Under certain conditions, the Internal Revenue Service recognizes tax deductions based on charitable donations. The deduction claimed must be based on the fair market value of the item or items being donated. In addition, the recipient qualified organization, (religious, charitable, educational, scientific, literary of the prevention of cruelty to children and animals) must have use for the items.

The Internal Revenue Service has guidelines and requirements regarding appraising and evaluating items for donation. An extensive explanation of various types of personal property, their evaluation  and donation for consideration as deductions is contained in Publication 561.

Generally speaking, claims for gifts and donations of personal property in excess of $5000.00 must be accompanied by an appraisal from a qualified appraiser indicating the fair market value for the item or items being donated.

The Internal Revenue Service defines the evaluation of jewelry and gems as follows:

"Jewelry and gems are of such a specialized nature that it is almost always necessary to get an appraisal by a specialized jewelry appraiser. The appraisal should describe, among other things, the style of the jewelry, the cut and setting of the gem, and whether it is now in fashion. If not in fashion, the possibility of having the property redesigned, recut, or reset should be reported in the appraisal. The stone's coloring, weight, cut, brilliance, and flaws should be reported and analyzed. Sentimental personal value has no effect on FMV. But if the jewelry was owned by a famous person, its value might increase." -  From  Publication 561

The Internal Revenue Service goes on to define a qualified appraisal as a document that:

1. Relates to an appraisal made not earlier than 60 days prior to the date of contribution of the appraised property
2. Does not involve a prohibited appraisal fee (the fee for the appraisal cannot be based on a percentage of the final evaluation or claimed deduction)
3. Includes certain information (see below)
4. Is prepared, signed, and dated by a qualified appraiser - From  Publication 561

A qualified appraisal is required to detail the following information:

1. A description of the property in sufficient detail for a person who is not generally familiar with the type of property to determine that the property appraised is the property that was (or will be) contributed,
2. The physical condition of any tangible property,
3. The date (or expected date) of contribution,
4. The terms of any agreement or understanding entered into (or expected to be entered into) by or on behalf of the donor that relates to the use, sale, or other disposition of the donated property,
5. The name, address, and taxpayer identification number of the qualified appraiser and, if the appraiser is a partner, an employee, or an independent contractor engaged by a person other than the donor, the name, address, and taxpayer identification number of the partnership or the person who employs or engages the appraiser,
6. The qualifications of the qualified appraiser who signs the appraisal, including the appraiser's background, experience, education, and any membership in professional appraisal associations,
7. A statement that the appraisal was prepared for income tax purposes,
8. The date (or dates) on which the property was valued,
9. The appraised Fair Market Value on the date (or expected date) of contribution,
10. The method of valuation used to determine Fair Market Value, such as the income approach, the comparable sales or market data approach, or the replacement cost less depreciation approach, and
11. The specific basis for the valuation, such as any specific comparable sales transaction. From  Publication 561

Once these conditions are met, a charitable gift deduction claim can be made. Submission of the necessary documents, forms, supporting documentation, and appraisal summaries are required by the Internal Revenue Service. The claim along with the supporting documentation is then subjected to review by the Internal Revenue Service to confirm compliance.

In conjunction with your tax advisor, we offer a complete Appraisal Service to you including identification and evaluation services for deductible charitable donations. It is highly recommended that a complete review of Internal Revenue Service requirements and regulations be understood before claiming a charitable contribution tax deduction.

Please contact us for assistance in determining the most appropriate valuaion for your jewelry and gem charitable donations.