Joshua,

There are a lot of issues here, so I'll limit my comments to just the "related use" question.  The analysis of the "related use" question varies for inter vivos and testamentary gifts.

For an inter vivos gift, review the Form 8283.

For an inter vivos gift of tangible personal property put to a related use, the value of the deduction is equal to the fair market value (FMV).  HOWEVER, if the gift is not used for a related use, the deduction is limited to the LESSER OF the FMV or cost basis.

If the donee institution sells the gifted object within 3 years (it used to be two) and files the 8282, there is a presumption that the gift was not put to a related use.  This could trigger adverse tax consequences for the donor.  However, this presumption is rebuttable and the donee can address the issue on the 8282.

Robert Vosburgh, Jr., Esq.
Director, Museum Communication Program
University of the Arts



-----Original Message-----
From: Jeffrey Ray <[log in to unmask]>
To: [log in to unmask]
Sent: Thu, Aug 12, 2010 11:13 am
Subject: Re: Donation/Deaccession Question

Joshua,

There is a small caveat to Ms. Boyer's message.  the IRS requires that a gift be retained by the receiving institution for 2 years.  If the museum should sell or transfer the gift during that time the IRS requires that IRS and the donor be notified.  As I understand it IRS had disallowed deductions for gifts sold within that period.  Our collections policies require the Philadelphia History Museum to retain gifts for a minimum of three years so that both the donor and the museum are protected.

If your donor received a tax deduction and the gift was free and clear, and/or unconditional then no reconciliation is required.  You certainly cannot return the painting to the donor because of the tax deduction. 

We have been evaluating our collections and very actively deaccessioning and as a courtesy I have contacted donors to let them know we are selling something t hey gave us.  The usual reaction is to ask if their deduction is still good and I have explained that it is.  Some have misunderstood the law and wanted the things back and I have explained that that cannot happen.  The vast majority have had no problem, some were disappointed and only one got really mad and let me have it.

I hope that this helps. 

Jeffrey Ray
Senior Curator
Philadelphia History Museum

On Thu, Aug 12, 2010 at 10:57 AM, Cindy Boyer <[log in to unmask]> wrote:
I don't think there is anything to reconcile.  The donor made a gift, received the tax credit. Even if the museum turned around and deaccessioned it the next day and sold it, that would not change the action and resulting tax benefit received by the donor - unless the object was returned to the donor.

Am I missing something here?

Cindy Boyer
Director of Museums and Education
The Landmark Society of Western New York
133 S. Fitzhugh St.
Rochester NY  14608
(585) 546-7029 ext. 12
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Fax:  (585) 546-4788
 
The Landmark Society:  Revitalizing Yesterday, Protecting Today, and Planning for Tomorrow

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