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Posted August 28th, 2018

IRS Has Issued New Gift Substantiation Regulations

These regs are important. They deal with gift receipts and qualified appraisals, documents on which IRS auditors focus. The new regs take effect January 1, 2019.

Without a correct gift receipt, Donor will have his or her entire federal income tax charitable deduction disallowed on audit. Same result as to an appraisal that doesn’t meet the definition of a “qualified appraisal.”

Here’s just one change that’s critically important:

  • Under current regs, an appraisal must state the date of gift or the expected date of gift to be a “qualified appraisal.” The appraisal also must state the FMV of the donated asset as of the date of gift or the expected date of gift.
  • Under the new regs, the appraisal still must state the date or expected date of gift. But the new regs require the appraisal to state the “valuation effective date” and the FMV as of that date.

What is the “valuation effective date”? It’s the date of gift if the date of the appraisal is after the date of gift. If the appraisal date is before the date of gift, it’s the date of gift or a date no earlier than 60 days before the date of gift.

Wow.

The compliance rate with the new regs is going to be about zero. I believe this because the compliance rate with the current regs is about zero.

Gift officers don’t have to study and understand the new regs in depth. But gift officers do need to be mindful that important changes are coming that will, in some cases, adversely affect donors.

If you have questions about the new regs, and you may have a lot, be sure to consult with a competent advisor, and make sure to suggest that donors of noncash gifts do the same.

By Jon Tidd, Esq

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