Cash | Marketable Securities | Clothing, Used Items and Other Tangible Personal Property | Closely Held Stock, Limited Partnership Interests and Limited Liability Company Interests | Real Estate | Conservation Easements | Life Insurance

Cash
Cash contributions are deductible on a dollar for dollar basis, if the substantiation requirements are satisfied.

Marketable Securities
Publicly-traded marketable securities are deductible at their fair market value on the date of the gift. For these purposes, the fair market value of a stock or bond is the mean of its high and low prices on the date of the gift. Mutual funds generally are valued using their closing price for the date of the gift.

Clothing, Used Items and Other Tangible Personal Property
Household goods and used clothing are usually worth far less than the original price paid when new. Deductions are permitted only for items in good used condition or better. Used items valued at $500 or more require a qualified written appraisal. Deductions for gifts of paintings, antiques and other objects of art are subject to special rules and reporting requirements. Any art valued at $5,000 or more must be supported by a qualified appraisal, and special rules apply to items worth $20,000 or more. Items valued at $50,000 or more may be pre-valued by the IRS. Generally, the creator of artwork can deduct only the cost of materials used in creating the work.

Closely Held Stock, Limited Partnership Interests and Limited Liability Company Interests
Gifts of such interests must be supported by a qualified appraisal of their fair market value at the time of the gift. The appraisal should take into account a variety of factors, such as net worth, prospective earning power, dividend-paying capacity, goodwill, the nature and history of the business, the economic outlook for the particular industry, the company’s position in its industry, the company’s competitors, the company’s management and the value of securities of entities engaged in the same or a similar business. Any restrictions on transferring the securities – whether imposed by federal law, the entity’s governing instrument or a shareholder agreement – also should be considered. Note that when gifts of this type of property are made to private foundations, the donor’s charitable deduction is limited to his or her cost basis.

Real Estate
Each piece of real estate is unique so the fair market value of a charitable contribution of real estate must be established by a qualified appraisal by a qualified appraiser. Generally one or more of three factors determine the approach to real estate valuation: comparable sales (with appropriate adjustments for differences in the properties), capitalization of income, and/or replacement cost (less depreciation). The weight given to these factors may depend upon whether the real estate is used for commercial or residential purposes. The deduction will be limited to cost if the gift is to a private foundation.

Conservation Easements
Deductions are available for qualified conservation contributions to public charities and to governmental units. The contribution must be made for specified conservation purposes, such as preserving land areas for outdoor recreational use by the general public, preserving a relatively natural habitat or ecosystem, preserving open space, or preserving a historically important land area or a certified historic structure. The contribution generally consists of a restriction on the property owner’s ability to use or change the property, rather than a gift of the donor’s entire interest in the property. A donor may, for example, give away his or her rights to build upon real estate or to change the façade of a historic building. The value of the contribution must be determined by written appraisal by a qualified appraiser.

Life Insurance
The value of the gift of a life insurance policy is its replacement value, which is the amount that the insurance company would charge for a comparable contract. On request, life insurance companies normally will provide a written statement of such value. However, if the charitable donee reasonably may be expected to cash in the policy rather than hold it as an investment, the fair market value for deduction purposes is the cash surrender value of the policy rather than the replacement cost.

A donor will not receive a charitable deduction merely by naming the charity as a beneficiary of the policy. Instead, the donor must transfer full ownership of the policy to the charity. In many cases where a donor gives a policy to a charity, the donor will then make annual tax-deductible gifts to the charity to cover future premiums. Note, if the donor plans to make subsequent gifts to the charity to cover premium payments and wishes to deduct such future gifts, there may not be a binding obligation on the part of the charity to retain the policy.