If you donate property to charity, you may be entitled to a deduction of tens or even hundreds of thousands of dollars if certain conditions are met. But you must obtain qualified appraisals from professionals for highly-valued gifts of property. In a new case, Cade, TC Memo 2025-30, 3/25/25, the taxpayer received sign-offs of the property donations that were made—but not the paperwork needed from qualified appraisers.
Basic rules: Generally, you can deduct the fair market value (FMV) of appreciated property donated to charity if you’ve owned the property longer than a year. Otherwise, the deduction is limited to your cost of the property. For property that has declined in value, your deduction is equal to the FMV, regardless of the length of your ownership.
The annual deduction for donations of property is limited to 30% of adjusted gross income (AGI). Any excess may be carried over for up to five years.
However, a taxpayer who claims a charitable deduction of $5,000 or more for a single item, or for multiple items of similar property, must obtain a qualified appraisal of the applicable items. Plus, the appraisal must be provided by someone who—
- Is certified by a professional organization or meet the education and experience requirements established by the Treasury Department.
- Is familiar with evaluating the type of property being donated.
- Regularly offer appraisals in return for a fee.
- Complies with any other requirements in the applicable tax regulations
New case: The taxpayer’s 2019 federal income tax return included a noncash charitable contribution deduction of $284,553. All the items were allegedly contributed on December 3, 2019, to a church in Albany, New York. The property contributed allegedly consisted of “surplus items” that were no longer needed for the taxpayer’s real estate business.
These items fell into the following three categories:
- The taxpayer claimed a deduction of $146,043 for the donation of personal clothing items. These items allegedly consisted of 2,253 “spring jackets” and 1,212 “short sleeve coveralls.” The items were reportedly acquired in June 2015 for $2,250. As of December 2019, they asserted that the “spring jackets” were worth $39 apiece (a total of $87,867) and that the “short sleeve coveralls” were worth $48 apiece (a total of $58,176).
- The taxpayer claimed a deduction of $89,100 for the donation of 16,200 “granite cobblestones of various sizes.” Reportedly, the taxpayer acquired these items in May 2013 at a total cost of $1,000. As of December 2019, the taxpayer asserted that the 16,200 cobblestones were worth $5.50 apiece (for a total of $89,100).
- Finally, the taxpayer claimed a deduction of $49,410 for the donation of 9,608 pieces of commercial vinyl tile and 10 four-gallon tubs of floor-tile adhesive. These items were said to have been acquired in January 2016 at a cost of $1,080. As of December 2019, the taxpayer asserted that the vinyl tile was worth $4.75 per square foot (a total of $45,638) and that the adhesive was worth $435 per tub (a total of $4,350).
Tax result: A church representative signed acknowledgements of receipt of all the goods as stated by the taxpayer. But there were no qualified appraisals provided to the charity or IRS, for that matter, to the Tax Court at trial. Therefore, the deduction is denied.
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Tags: charitable deductions, IRS, tax deductions
