Qualified Gift Appraisal

The new rules apply to all gifts of non-cash property including gifted life and settlement policies. A donor must obtain a Qualified Appraisal from a Qualified Appraiser for all such gifts valued over $5,000 and must attach an appraisal summary to their return (Form 8283). For gifts of art valued at more than $20,000 or all other gifts valued at more than $500,000 an actual appraisal must also be attached. These rules also apply to gifts for both income tax and gift tax purposes.

PPA 2006 now sets the specific definition for the credentials of a Qualified Appraiser and establishes the convention requiring the preparation of the appraisal in accordance with generally accepted appraisal standards as defined by the Uniform Standards of Professional Appraisal Practice (USPAP) published by the Appraisal Standards Board of the Appraisal Foundation. Notice 2006-96, Section 3.03

Treasury regulations define an acceptable appraisal as:

• An appraisal made no earlier than 60 days prior to the date of the gift or no later than the due date of the donor's tax return
• An appraisal that is signed and dated by a "Qualified Appraiser"
• An appraisal that includes all required information
• An appraisal that does not involve a prohibited fee (based on the value)

The information that must be in a Qualified Appraisal includes:

• Description of the property
• A specific basis for the valuation
• A statement that the appraisal was prepared for income tax purposes
• A statement listing the qualifications of the Qualified Appraiser
• The appraiser's signature and taxpayer ID number.
• An Appraisal Declaration - which includes a statement that the appraiser understands that a substantial or gross misstatement, that the appraiser knows, or reasonably should have known, would be used in connection with a return or claim for refund, may subject the appraiser to a civil penalty.

Additional information that is required:

When an individual claims a charitable deduction for property worth more than $5,000, other than cash or publicly traded securities, there is a requirement that a qualified appraisal must also be attached in addition to the appraisal summary which, among other things, must include:

• Identifying information about the donor
• The date and method of acquisition of the property
• The donors cost basis in the property
• The amount of any consideration paid to the donor in the event of a "bargain" sale
• The appraised Fair Market Value (FMV)
• A statement by the appraiser that the fee charged is not prohibited (a percentage of the appraised value) and that the appraisals prepared by the appraiser are not being disregarded by the IRS.