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| Advisors' Forum |
After the Gavel Falls
12/01/2005
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I recently attended a charity auction for a favorite philanthropy and, caught up
in the moment, bought a pearl necklace for $8,000. It’s a lovely piece of
jewelry, the price was a steal, and it was a pleasure to help a worthy cause.
But I am not likely to wear the necklace on the subway. I would like to sell it
and give the proceeds to the same charity. Can I? How would I proceed? Are there
other ways to maximize giving at an auction?
Because you are the owner of the necklace, you are free to sell it by
whatever method you choose and to give the proceeds to the charity of your
choice.
One thing to keep in mind is that prices paid at a charity auction do
not necessarily reflect market value, so when presenting your necklace to a
sales agent, whether it is a jeweler or an auctioneer, the price may vary from
what you paid at the charity auction.
Alternatively, you could also present
the necklace to the charity and it might resell it in another charity auction.
The exact tax benefits to you under these different options may vary, so we
suggest you speak with your tax advisor before making a decision.
George
McNeely, senior vice president, Christie’s, New York (and frequent
charity auctioneer)
You could sell the jewelry now and donate the proceeds to the charitable
organization. There would be no tax due on the sale and you could claim a cash
charitable contribution on your Form 1040, Schedule A.
You can donate the
jewelry directly to the charitable organization and claim a non-cash charitable
contribution, too. Because the donated value is greater than $5,000, you would
need an appraisal. However, the cost of the appraisal would be comparable to a
commission you would pay to have the jewelry sold. The following would be the
steps for donating the jewelry:
• Have the jewelry appraised by a qualified
appraiser, and have the appraiser complete Part III of IRS Form 8283.
• Have
the charitable organization complete Part IV of Form 8283.
• You would
complete Parts I and II of Form 8283 and attach the form to your return.
You
can claim a tax deduction for other household items such as furniture, books and
art that you give to the charitable organization for auction, too.
Michael
Freedman, partner, Gelman Rosenberg & Freedman (accountants), Bethesda,
Md.
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