Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

This answer was rated:

Business charitable donation question. Our company sells…

Business charitable donation question. Our...
Business charitable donation question. Our company sells pre-owned medical equipment that we purchase from various sources. We are a Sub-S corp. We want to donate some equipment to a charitable organization which will help us reduce our tax liability.1. Some pieces of equipment have a value of over $4000. Which according to the IRS form (form 8283) would need an appraisal. Is this correct? Are there any exceptions or any way to avoid the appraisal requirement?2. Does it matter what we actually paid for a specific piece of equipment? For example, if we only paid say $2000 for a piece of equipment and it appraises for $10,000, can we deduct the appraised value or only our cost? On the form it does ask how the item was acquired and cost basis.Please explain how that works. And possibly an example of how the form would be filled out.
Show More
Show Less
Ask Your Own Tax Question
Answered in 5 minutes by:
8/29/2017
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,889
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

1. Any personal property with a claimed deduction of $5,000 or more, Section B of IRS Form 8283 must be completed (including “qualified appraiser’s” and donee’s signatures) and attached to the tax return. A qualified appraisal must be prepared for the donated property.

...

I'm so sorry, but there are no exceptions, any return filed with the value over 5K without an appraisal will automatically "Kick-out," and you'll be asked to submit the appraisal or accept the return changed by IRS not showing the deduction at all.

...

2. The rule for donations is lower of cost or market. This is a basic premise of cost accounting (and GAAP, and tax). You cannot deduct something for more than your basis (for more than you have IN it).

Ask Your Own Tax Question

Please let me know if you have ANY questions at all, before rating me.

If this has helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

I hope that you’ll rate me based on my accuracy and thoroughness, rather than any good news/bad news content.

That’s the only way JustAnswer.com will compensate me for the work here.

Thanks,

Lane

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice on three continents since 1986.

Ask Your Own Tax Question
Customer reply replied 11 months ago
Ok, I am confused. Here is a section directly from the Form 8283. It is an example of a donation of inventory:
So according to this if we paid $1000 for a piece of equipment that is valued at $10000. We would have already deducted the $1000 for COGS and the remaining would be $9000 as the charitable donation. So the deduction amount would definitely be higher then the amount we paid, as is the same in example below (they deducted their COGS plus an additional amount). But you said in your response that we can not do this. Please clarify.Directly from IRS form instructions:
Example. You donated clothing from your inventory for the care of the needy. The clothing cost you $5,000 and your claimed charitable deduction is $8,000. Complete Section A instead of Section B because the difference between the amount you claimed as a charitable deduction and the amount that would have been your COGS deduction is $3,000 ($8,000 – $5,000). Attach a statement to Form 8283 similar to the following:Form 8283—
Contribution deduction
$8,000
COGS (if sold, not donated)
– 5,000
For Form 8283 filing purposes
=$3,000

You are using the rules for a regular corporation (a C-Corp).

...

For non C corporations, the deduction is limited to an amount equal to the lesser of the cost basis or the fair market value of the inventory. Non C corporations do not benefit from the additional deduction for an amount above the cost.

Ask Your Own Tax Question

If a corporation, other than an S corporation, makes a gift of inventory, property held for sale to customers in the ordinary course of business, or depreciable or real property used in the trade or business, it may deduct its basis for the property, plus one-half of the property's unrealized appreciation. The claimed deduction, however, may not exceed twice the basis of the property (section 170(e)(3)).

...

But again, this rules does not apply to pass-throughs. An S-Corp works like a partnership in many regards. THe same goes here, with the individual shareholders receiving a k-1 showing their share of any charitable contributions of the corporation.

...

This becomes a personal deduction for the shareholders

Ask Your Own Tax Question
Customer reply replied 11 months ago
Thanks for the clarification. So, here an example:We donate a xray machine that we paid $5000 for. That $5000 is already being deducted as COGS on our taxes. We then donate that piece of equipment. Do we still get a deduction for the donation? What would be the amount?

What inventory method do you use. If the equipment is still IN inventory, depending on your inventory method (LIFO, FIFO) it may not yet be a part OF COGS.

...

But it that specific piece of inventory has already generated a tax deduction of it's fulll cost, then you have no basis (nothing to deduct).

...

To claim a deduction for donated inventory -- defined as products you sell in the ordinary course of your business for income -- you must first have done an opening inventory and accounted for your cost basis in the inventory. Your cost basis is the amount your business paid to manufacture or acquire your inventory. If you have not done an inventory that includes your tax basis, then the IRS will deem you to have a tax basis of zero in your inventory, and you will be prohibited from claiming a charitable deduction.

Ask Your Own Tax Question
Customer reply replied 11 months ago
from what I am understanding there is really no tax benefit to us donating any of our inventory. Would you agree with that statement?
You end up in the same place, either it is deducted as COGS and you sell the item and make a profit, or donate it and the only deduction is the same as would be if it was written off as COGS. And you don't make any profit.

That's exactly right. Deducting it twice would be double dipping.

...

C-Corps can do it becasue they are a separate taxable entity and the double taxation (the fact that the corporation pays it's own taxes, then money coming out to shareholders, a lower amount now becasue the C-Corp had to pay it's own taxes, are taxed again) makes this equitable.

...

For the passthrough owner it really would be allowing you to deduct air

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,889
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Tax Specialists are ready to help you
Ask your own question now
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a tax professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask Lane Your Own Question
Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,889
14,889 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

Lane is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,338 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,512 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

59 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,569 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

< Previous | Next >

Related Tax Questions
If i donate $200 each day for 10 days to different
if i donate $200 each day for 10 days to different charities, and the goods are similar like various items of men's clothing, have I exceeded the $250 limit to trigger requirement for an acknowledgeme… read more
taxmanrog
taxmanrog
Master\u0027s Degree
1,053 satisfied customers
I work for a library. Here's the scenario:. A donor gives us
I work for a library. Here's the scenario:. A donor gives us a rare book appraised by an authorized appraiser--$120,000. The donor wants our library to sign the 8283 IRS form document for their record… read more
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
2,607 satisfied customers
I am an s-corporation and own a clothing and accessories
I am an s-corporation and own a clothing and accessories store for women. Sometimes at the end of the season, I will donate leftover clothing to women's shelters or things such as that. How do I go ab… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,328 satisfied customers
I have a taxpayer that had acquired an electric wheelchair
I have a taxpayer that had acquired an electric wheelchair for medical reasons. The wheelchair was mostly paid for by insurance. The wheelchair was acquired in May of 2015 and the taxpayer passed away… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Question about noncash charitable contributions. If any single
Question about noncash charitable contributions. If any single item from my donation is less than $500, do I need file 8283? What is the max of my total contribution allowed w/o filing 8283? Do I need… read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
How does donations as tax deductions and what do I need from
How does donations as tax deductions and what do I need from the organization I donate to? What is the difference between tithes and goods donations… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I am donating a ex-military airplane which I and a aircraft
I am donating a ex-military airplane which I and a aircraft mechanic have spent nearly ten years rebuilding to "near new" condition, to a new aircraft museum being set up in Colorado. The museum has a… read more
abci168
abci168
Principal
27 satisfied customers
In settling my mothers estate, we donated to charitable organizations
In settling my mother's estate, we donated to charitable organizations clothing, furniture, household goods, etc totaling 12,000.00 in 2012. We have taken photos of all items and estimated FMV based u… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,569 satisfied customers
I want to donate my classical grand piano to a local nonprofit
I want to donate my classical grand piano to a local nonprofit organization. Can I get a 'credit' or deduction for this donation (appraised value about 12000)? thanks. elaine… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Charitiable non cash deductions....I have a client who has
Charitiable non cash deductions....I have a client who has a lot of clothing that was bought from high end stores that were given to the Salvation Army and Good Will, most with tags still on them as s… read more
Charles Greiner
Charles Greiner
Owner
Bachelor's Degree
2,436 satisfied customers
We are thinking of donating a small S.C. commercial
We are thinking of donating a small S.C. commercial property to an approved charitable organization , and have a few questions. BACKGROUND: My wife inherited this property in 2000. Her original cost b… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
steven--client-gifts $100,000. in 2010 to charity by ck.-gift
steven--client-gifts $100,000. in 2010 to charity by ck.-gift to: XXXXX XXXXX univ. charitable gift annuity program. please confirm approx.#'s for 1st yr.( age 74). calc. 1st yr. tax ded. approx. 30M.… read more
MequonCPA
MequonCPA
CPA Firm Owner
Master's Degree
2,165 satisfied customers
Our 501,c,3 LLP is building a club house for our soaring club.
Our 501,c,3 LLP is building a club house for our soaring club. It is on a public airport and we have a 30-year lease on the land. Is it acceptable to build the club house with our money, have the buil… read more
BK-CPA
BK-CPA
Bachelor's Degree
687 satisfied customers
I have a commercial property that I have been unable to sell
I have a commercial property that I have been unable to sell and am considering donating it to a non-profit organization. Can I deduct all of the appraised value? What would be my main concerns? This … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,569 satisfied customers
I thought I entered my question. There is an elderly friend
I thought I entered my question. There is an elderly friend of mine in our community that has a Lowrey organ-Director Model LC/35 that she donated to a church choir. She does not know what amount to p… read more
BK-CPA
BK-CPA
Bachelor's Degree
687 satisfied customers
Scenario Gave to charity (Salvation Army) 3 Vending ...
Scenario: Gave to charity (Salvation Army) 3 Vending Machines purchased in 2002. Donated 11/2007 as "the business" was unsucessful...Desolved in 2007. I have purchase receipt info (paid $17,987.00 for… read more
Marvin,EA
Marvin,EA
Enrolled Agent
Bachelor's Degree
1,605 satisfied customers
I have precious gemstones I wish to donate to a ...
I have precious gemstones I wish to donate to a church or university. How does the IRS treat such items for tax writeoff? Do they use 50% of the appraised value, or the actual value paid for the gemst… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
As senior citizens our combined income was $19,244; ...
As senior citizens our combined income was $19,244; however, our contributions (donations $8,218.92) totalled $26,383 (In addition we gave away a livable mobile home to use for charity in Mexico and h… read more
Christopher Phelps
Christopher Phelps
Sole Practitioner
Master Degree
1,180 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x