Watch out for compliance pitfalls as clients favor gifts of hard-to-value assets

If volatile market conditions persist, gifts of hard-to-value assets may become popular substitutes for appreciated stock gifts. That’s why it’s important to keep a close eye on the IRS’s scrutiny of Form 8283, “Noncash Charitable Contributions,” especially now that the final regulations governing substantiation and reporting have taken effect.

It is critical to pay attention to the details when your clients have made gifts of hard-to-value assets. In Chad Loube et ux. v. Commissioner; No. 5092-17; T.C. Memo. 2020-3, the taxpayers failed to provide the required components of the “appraisal summary” and instead attached a full appraisal to the Form 8283 to substantiate the value of their charitable contribution.

According to the Tax Court, attaching a full appraisal did not constitute substantial compliance. “While it may have been possible for the Commissioner to glean sufficient information from the purchase price and tax information listed in the appraisal,” stated the Memorandum Opinion, “that does nothing to change the fact that Congress specifically passed [the] heightened substantiation requirements so that the Commissioner could efficiently flag properties for overvaluation from the face of appraisal summaries. In so doing, Congress wanted precisely to prevent the Commissioner from having to sleuth through the footnotes of millions of returns.”

In other words, the IRS won’t do your work for you.