I think that this question and answer is important to both lists.
The original question:
An artist who donated her own work to my institution has sent me a =
form 8283 for that donation. I have never received this form for this =
kind of donation before. Is this the correct form for her to use? I'm =
aware that she can only deduct the cost of materials. Is there some =
other document which would be more appropriate for her to use?
Thanks,
Michelle
Michelle Gallagher Roberts
Chief Registrar
New Mexico Museum of Art
[log in to unmask]
The answer from the IRS, they had to discuss this a bit since it was an
interesting question for them. Joe Bothwell is happy to answer any
questions from the museum world, feel free to call him. Sara Conklin, ISA
CAPP, Antique Appraisals and Rent a Registrar, PH: 800-464-4208
Hi, Sara:
After some discussion among my colleagues, I think I have your answer.
When an artist (or maker) donates their own work, it is treated as ordinary
income property. Ordinary income property is property made by the taxpayer
for sale in their regular business. For ordinary income property, a
taxpayer is allowed a deduction based upon the fair market value less any
short-term capital gain, which reduces it to cost of materials, or the fair
market value, whichever is less. Generally, one would assume that the cost
is less than what the artist would sell it for, but an artist's market can
go down. Once the determination has been made as to which figure is used,
cost or FMV, then we get to the 8283. If the value of the deduction is
under $500, an 8283 is not needed. If the value is from $500 to $5,000, the
taxpayer/donor needs to fill out Section A of the form, which under Part I
has four columns marked 1(e) through 1(h). Column 1(e) asks "How acquired
by donor" (answer: self created or a similar phrase), column 1(f) asks
"donor's cost or adjusted basis", column 1(g) asks for "Fair market value",
and column 1(h) asks for "Method used to determine the fair market value"
(answer: market value or comparable sales or something like that). If the
value is over $5,000, the donor needs an appraisal and also has to fill out
Parts I & II of Section B (the flip side) of form 8283. If you have, say, a
sculptor who donates a large work, the cost of materials (bronze, ceramic
slurry, wax, armatures, modeling clay, foundry costs, whatever) might be
over $5,000, so an appraisal would be needed to determine the fair market
value. Assuming the appraisal confirmed a FMV over $5,000, then the donor
has to fill out columns 5(e), 5(f), and 5(h). Column 5(e) asks "How
acquired by donor", column 5(f) asks "Donor's cost or adjusted basis",
column 5(h) asks "Amount claimed as a deduction". While there is no further
requirement, I would suggest that any artist enumerate their cost basis on a
separate page and attach it to the 8283 (this obviously presumes a
submission by snail mail or the like). The artist should have documents or
the like that support the cost basis (invoices, receipts, etc.).
If you have any further questions, let me know.
Regards,
Joseph Everett Bothwell
Badge no. 0218566
IRS Art Appraisal Services
202-435-5611
Joseph Everett Bothwell
Badge no. 0218566
IRS Art Appraisal Services
202-435-5611
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