ACQNET v5n037 (November 28, 1995) URL = http://hegel.lib.ncsu.edu/serials/stacks/acqnet/acqnet-v5n037 ISSN: 1057-5308 *************** ACQNET, Vol. 5, No. 37, November 28, 1995 ========================================= (1) FROM: Carole Bell SUBJECT: Report of from Chicago ALA: Gifts & Exchange Discussion Group (178 lines) [NOTE: This is long but quite interesting and worth keeping! And just in time to "warm up" to tax season ... --Ed.] (1)---------------------------------------------------------------- Date: Fri, 03 Nov 1995 12:19:35 -0500 From: Carole R. Bell (Northwestern U.) Subject: G&E discussion group in Chicago This message has been cross-posted to Acqnet, Colldv-l & Giftex-l, please excuse the duplication. A very late report from the Gifts & Exchange Discussion Group at ALA, Chicago with a reply from the IRS speaker. The Gifts & Exchange Discussion Group met in Chicago on June 26, 1995. Officers for 1995/96 are Chair: Catherine Denning, Brown University and Vice Chair/Chair Elect: Lu Rossignol, Smithsonian Institution. The topic was: Library Certainties: Gifts & Taxes Our first speaker was Dorothy Speidel, Deputy Director of Planned and Major Gifts at Northwestern University. Ms. Speidel discussed library gifts from the development office's point of view. She described gifts in kind, building endowments, donor relations, building a friends group and how librarians can play a role in developing annual giving plans, etc. Our next speaker was Peter Mazarakos from the Internal Revenue Service. Mr. Mazarakos explained the IRS's tax forms that are required when donors give gifts of materials to the library. A discussion ensued about the ways in which librarians deal with donors and the kinds of information we give to donors, including IRS forms, dollar amounts necessary to file tax forms, acknowledgements, etc. Mr. Mazarakos talked about the fair market value of a gift, appraisals, and that the taxpayer is responsible to determine the fair market value, not the library. The group asked Mr. Mazarakos about the selling of gifts before the 2 year period. A lively discussion continued when Mr. Mazarakos indicated that the donee had to file form 8282 even if an appraisal had not been submitted. The librarians believed that the donee (the library) only had to submit form 8282 within the 2 year period if they were selling off the items that had been appraised. In addition, the group asked Mr. Mazarakos about library's responsibility about notifying the IRS about gifts. Below, I have copied the information sent to me by Mr. Mazarakos on August 2, 1995. I have scanned this information, so please excuse any errors. Dear Carole, At long last I am responding to the unanswered questions presented at the Gifts and Exchange Discussion Group session, June 26, 1995. I apologize for the delay and wish I could think of a reasonable excuse. The information on the attached two pages was garnered from the enclosed publications and forms. I enjoyed attending your group's session and was pleased with the absence of the animosity usually afforded me when I announce my job title. Please call me........Peter J. Mazarakos, Jr. Responsibilities Of Tax Exempt Libraries In Receipt Of Contributions Of Appreciated Property (Books) and The Effect On A Donor's Tax Liability When Such Contributions Are Put To An Unrelated Use (Sold) Question 1 When must a library notify the Internal Revenue Service of the disposition of contributed books? If a library, within 2 years after the date of receipt of a contribution of books for which it was required to complete and sign Part IV, Donee Acknowledgment (Section B, Appraisal Summary) of Form 8283, sells, exchanges, transfers, or otherwise disposes of the books, the library must file an information return with the Internal Revenue Service on Form 8282, Donee Information Return, and send a copy of the form to the donor. The library does not have to file Form 8282 if, at the time the library signed the appraisal summary, the donor had signed a statement on Form 8283 that the appraised value of the specific book was not more than $500. If Form 8283 contains more than one book, this exception applies only to those books that are clearly identified as having a value of $500 or less. For this purpose a collection of books by the same author are considered one book. Section B. Part IV, Donee Acknowledgment of Form 8283 must be signed by an official authorized to sign the tax or information returns of the library, or by a person authorized by such an official to sign Form 8283. The signature does not indicate agreement with the appraised value of the property. It represents acknowledgment of receipt of the property described in the appraisal summary on the date specified on the form. It also acknowledges that the organization understands its information reporting requirements if it disposes of the property in any way within 2 years after the date of receipt. A taxpayer must file Form 8283, Noncash Charitable Contributions, if the amount of his deduction for all noncash gifts is more than $500. The taxpayer completes Section B of Form 8283 when a deduction of more than $5,000 is claimed for an item or group of similar items. Therefore, a library would be required to complete the Donee Acknowledgment part of Form 8283 only when the taxpayer has claimed a deduction of more than $5000 for a book or group of books. [Note from Carole Bell: As I understand this, he is saying exactly what the participants said in this meeting. "If a gift is appraised, and Section B of form 8283 is signed, then the library must fill out and send form 8282 to the IRS and the donor if they dispose of the items listed (within the 2 year time frame)". (my quotes) The other thing I think he is saying here, is that, if, in the appraisal or in Section B, individual items are listed as not being worth more than $500 each, then the library could dispose of them without filing form 8282. Is that how others view this?] Question 2 What is the effect on a donor's tax liability when a library disposes of contributed books within 2 years of receipt? A library may dispose of contributed books without adversely affecting the donor's tax liability if: a. The donor has not claimed a charitable deduction for the contributed books; or, b. The charitable deduction claimed for the contributed books was the lesser of the fair market value or the donor's basis. However, there may be a significantly adverse effect on the donor's tax liability when the donated books are capital gain property, and the donor has taken a charitable deduction in the amount of the appreciated value of the books. In situations where the library is required to file Form 8282, Donee Information Return, the donor's tax return will be inspected and the donor will be billed for any increase in tax resulting from the disallowance of the contribution amount in excess of the donor's basis in the contributed books. As explained above, a library would be responsible for filing Form 8282 only when Section B, Part IV, Donee Acknowledgment of Form 8283 has been completed and signed by an authorized person and the part of the group of books disposed of by the library was not valued at $500 or less. A library may, therefore, receive contributions of books without any requirement to notify the Internal Revenue Service of any disposition of such books within two years of receipt. However, whether or not the Internal Revenue Service is notified does not impact on the allowable charitable deduction amount. A taxpayer must reduce the amount of his contribution by any long-term capital gain if the contributed books are put to an unrelated use (sold) by the library. Where does this leave the taxpayer who has contributed books to a library and has claimed a charitable deduction in the amount of their appreciated value? If a taxpayer wants to have a contribution of books valued at their appreciated fair market value he should obtain a letter of intent from the donee library which states that the library intends to use the books for its exempt purpose with a brief explanation of how their use furthers its exempt purpose. It is the responsibility of the donor to notify the library that the contributed books are capital gain property and that their sale or other unrelated use within two years would adversely affect his tax liability. [Note from Carole Bell: I don't think he is telling us anything here, we didn't already understand.] If anyone has any additional questions or comments about this topic, please feel free to contact me, and I will summarize the messages to the lists. Thank you, Carole R. Bell Acting Head. Serials & Acq. Northwestern Univ. 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