IRS Upping Investigations of Abusive Charitable Deductions

April 12, 2011 Posted by The Law Firm for Non-Profits, P.C. in Charitable Deductions, IRS, Taxes

As tax season nears, the IRS warned that it is increasing its investigations of the misuse of charitable deductions.

A particular focus of the IRS are various schemes involving the donation of non-cash assets including donations that are highly overvalued or where the charitable organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor. Other abuses include arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or income from donated property.

Taxpayers who engage in such schemes face recently increased penalties for inaccurate appraisals. To avoid such penalties, donors must be sure to have non-cash donations valued in excess of $5,000 evaluated by a qualified appraiser who satisfies recently imposed IRS standards.

Charitable organizations also have an obligation to notify the IRS and taxpayer when they sell most donated items within three years of their donation. We can forward links to guidance on appraiser standards and assist charities in meeting their obligations.

NOTE: The information contained herein is not intended to be legal advice and the reader should know that no Attorney-Client relationship or privilege is formed by the posting or reading of this article which is also not intended to solicit business.

Casey Summar, Partner, The Law Firm for Non-Profits, 4705 Laurel Canyon Blvd, #306, Studio City, CA 91607

Comments are closed.