Qualified Appraisal for Gifts of Life Income Interest
Donors receiving income from charitable gift annuities, pooled income funds, and charitable remainder trusts may decide to make a gift of their income interest to the charity receiving the remainder of the gift. Upon the transfer of the income interest to the charity, the life income gift is then terminated and funds become immediately available to the charity. Based on certain criteria related to each situation, the donor may receive an income tax charitable deduction. However, like with other non-cash gifts, donors need to be aware of the IRS substantiation requirements for an appraisal when making a gift of a life income interest to charity. Failure by the donor to comply with these requirements can result in the donor being denied the charitable deduction.
IRS appraisal requirements apply to gifts other than money or publicly traded securities. Since a life income interest in an existing planned gift is neither money nor a publicly traded security, the appraisal rules apply. The donor must obtain a qualified appraisal performed by a qualified appraiser when the charitable deduction will be greater than $5,000. Gift planners at a charity are disqualified from providing a qualified appraisal, as they work for a party to the gift. The qualified appraisal must be performed not earlier than 60 days before the date of the contribution of the appraised property, nor later than the due date (including extensions) of the return on which the deduction for the contribution is first claimed.
Donors making planned gifts should always consult their professional advisors. However, it is prudent for the charity to inform a donor who is making a gift of an income interest of the necessity to obtain a qualified appraisal and to file IRS Form 8283 with their income tax return. PG Calc offers a Qualified Appraisal Service (https://www.pgcalc.com/consulting/qualified-appraisal.htm) if your donors make this kind of gift.