Qualified Appraisals

Giving up your interest in an existing planned gift can be a great gift to charity and result in an additional charitable deduction for you. A qualified appraisal is required for any non-cash contribution if the charitable deduction is more than $5,000. In addition, some practitioners advise clients to secure an appraisal of the charitable remainder interest when a charitable remainder trust or pooled income fund gift is established.

The appraisal package from PG Calc will include an appraisal report, a chart documenting the actuarial calculations, an IRS Form 8283 completed and signed by a qualified appraiser, and an election statement if the IRS discount rate for one of the two months prior to the date of termination is used.

You should allow five to seven business days from when we receive complete documentation. We’ll let you know if it might take longer due to scheduling issues. If you are concerned about meeting the April 15 tax filing deadline you may wish to consider requesting an extension.

Unlike a gift of property, where it is common to obtain an appraisal prior to completing the gift, we usually perform these appraisals only after the planned gift has been assigned or terminated so that we can review the complete documentation including final values when preparing the appraisal.

If you are considering whether to assign or terminate a planned gift in favor of the charity and want a preliminary estimate of the deduction value, we are happy to provide a calculation by phone or email. (The charity can perform this calculation for your with either PGM or PGM Anywhere.)

No. If the planned gift being assigned or terminated involves real estate (such as a home or farm in a retained life estate), life insurance contracts, closely-held business interests, or non-publicly-traded securities that need to be appraised, you will need to seek out the services of an appraiser qualified to value that type of property. If the appraiser is not also qualified to appraise life interests or lead trust remainder interests, you may still want to engage PG Calc for that appraisal.

No, because your gift is not the full amount, but rather the value of the life interest (or lead trust remainder interest) you are transferring to the charity. The deduction value will be a portion of the full value determined using formulas and actuarial assumptions proscribed by the IRS.

For a charitable gift annuity, the charitable deduction for a termination is limited to the lesser of the appraised value of the remaining life interest or the unrecovered tax-free portion of the investment in contract plus unreported long term capital gain. We will prepare the appraisal on this basis unless otherwise requested.

For a pooled income fund, the highest rate of return for the last three years, determined under the IRS regulations, is used to perform the valuation. For other gift types we will use the IRS discount rate for the month of termination or the two prior months, which ever produces the highest appraised value.

For a gift annuity, we will use your unrecovered investment in contract based upon the original gift.

For a charitable remainder trust, pooled income fund, or retained life estate, we will assume the cost basis is $0 pursuant to section 1001(e)(1) of the Internal Revenue Code regarding the determination of gain or loss from the sale or other disposition of a term interest in property unless you inform us otherwise.

We will prepare Form 8283 Section B Part I, “Information on Donated Property” and will sign Section B Part III, “Declaration of Appraiser.” You will need to obtain the signature of the  donee charitable organization on Section B Part IV, “Donee Acknowledgment.” Upon request, we can send the Form 8283 directly to the donee charitable organization with a request they sign and forward it to you.

You would be well advised to seek the assistance of a competent tax preparer to secure the full tax benefits of your charitable deduction. Your tax preparer can advise you about which forms, statements, and other documents should be included with your return and how to complete them, how the AGI percentage limitations might affect your deduction and how to take advantage of carryovers into future years or from past years, and whether you can file electronically.

No. In fact, we ask that you do not provide your Social Security number. The Form 8283 requires you to enter your taxpayer identification number before filing but, for privacy and security reasons, we would prefer that you enter that information yourself after you receive the Form 8283 from us. 

IRS regulations require use of special factors if any of the individuals whose lives measure the life interest is subject to a terminal illness which is defined as being known to have an incurable illness or other deteriorating physical condition where there is at least a 50% probability that the individual will die within one year. Please consult your tax advisor concerning what documentation should be obtained in your situation.

When a charity acknowledges receipt of a contribution on a Form 8283, it must file Form 8282 if it is disposed of within three years. For a gift annuity termination, the charitable contribution relieves the charity of its obligation under the gift annuity contract and so there is no subsequent disposition for which a Form 8282 would need to be filed. For a charitable remainder trust or pooled income fund termination, the income interest being contributed merges with the charitable remainder interest the charity already owns, and the Form 8282 should be filed when the trust is distributed to the charity. For surrender of a retained life estate in a home or farm to charity, the Form 8282 would be filed when the home or farm is sold.

Most charities do not pay for appraisals required for contributions of real estate, life insurance, artwork, or other property. An appraisal for the early termination of a planned may be different because the charity also has an interest in the property being given and it can be more difficult for a donor to find a specialized appraiser for this type of gift. For these reasons, some charities pay the appraisal fee as a fundraising cost, while others feel the appraisal fee is a tax preparation expense that should be borne by the donor.

If the charity pays the appraisal fee, the charity should disclose what it paid for the appraisal on the gift acknowledgement, and you should consult with your tax advisor to determine how this may affect the amount of your charitable deduction.

If multiple charities are receiving portions of the termination, you will need a Form 8283 for each charity. There is a discount when separate appraisals are needed for the same contribution. Separate appraisals may be needed if terminating the separate interests of divorced spouses, spouses filing separately rather than jointly, or children or other non-spouse beneficiaries.

While a qualified appraisal and IRS Form 8283 are not required if no charitable deduction is being claimed, an appraisal can help assure the charitable and noncharitable beneficiaries that the cashout is fair and equitable.

This can raise questions as to whether a charitable deduction can be claimed for the value of the survivorship interest or just for the primary life interest. If the donor disclaims the right to revoke before the termination, it may allow for a deduction for both. We recommend discussing this issue with your legal counsel drafting the termination agreement.

Yes, we can provide examples. However, PG Calc cannot provide legal advice or perform legal services for you. Your termination documents must be tailored to the particular agreement or trust and to the requirements of your state law.