Gifts of tangible property may provide larger capital gains tax savings than other long-term appreciated property (assuming it is something we can use for our charitable exempt purposes).
Tangible personal property includes items such as:
- Rare book collections
A gift of tangible personal property works like this:
- You will likely want to begin by talking with us about your proposed gift to determine if it is something we can accept and, if so, if it will be used for our charitable exempt purpose.
- You will obtain a qualified appraisal for your gift item(s).
- You make an outright gift of your tangible personal property to Citizens & Scholars.
- Your gift may qualify for an immediate income tax charitable deduction for either the full fair market value (if we can use it for our charitable purposes) or for your cost basis in the property.
- Assuming the property has appreciated in value, you can benefit by owing no capital gains tax on the donated property (collectibles are taxed up to 28%, versus appreciated real estate or securities, which are only taxed up to 20%).
- Citizens & Scholars will either keep the property for our own use or sell it and use the proceeds to further our mission.
Other ways to give tangible personal property
- A bargain sale. It may be possible to make a bargain sale of your tangible personal property. In other words, you sell it to us for less than its actual fair market value, meaning you get both proceeds from the sale and an income tax charitable deduction (and possible capital gains tax benefits) for the gift portion of the transaction. Read more about bargain sales.
- A gift in your will or living trust. You could also choose to keep your property during your lifetime and donate it to us at death through a gift in your will or living trust. Read more about these gifts.
Evaluate the fit.
A gift of tangible personal property may be a particularly good option to consider if you want to:
- Minimize or eliminate the capital gains tax due on appreciated collectibles
- Qualify for an immediate federal income tax deduction (subject to limitations)
- Make an extended impact on Citizens & Scholars with a gift that we can use or sell
Kyle calls Citizens & Scholars to discuss donating a rare collection of books on the U.S. government, history, and democracy. If we can use the book collection for our tax-exempt purpose, Kyle’s gift will qualify for a deduction for the full fair market value of the collection. If not, he can deduct only his cost basis in the collection. Kyle obtains a qualified appraisal on the collection and makes the gift, not only benefiting from the deduction but also bypassing any capital gains tax he would have owed if he had sold the collection.
Consider your timing.
It may take some time for us to determine if and how we can use the donated property and for you to obtain a qualified appraisal. If you want the deduction this year, it is best to start the process in November.
We can help.
We are happy to discuss any items you may wish to donate. We can help you determine how they will be used, what your benefit will be, and how long it may take to complete the gift process.