Determining The Value Of Donated Property Instructions - Publication 561 (Page 7 of 11) in pdf

1) The FMV of the assets of the business,

If you call in your order, you can pay by VISA

the contribution. Multiply this value by the ap-

or MasterCard.

propriate factor. Publications 1457 and 1458

2) The demonstrated earnings capacity of

Tables containing actuarial factors for

contain these factors.

the business, based on a review of past

transfers to pooled income funds may also be

You must make an adjustment for depreci-

and current earnings, and

found in Income Tax Regulation 1.642(c)–

ation or depletion using the factors shown in

3) The other factors used in evaluating cor-

6(e)(5), transfers to charitable remainder uni-

Publication 1459 (Gamma Volume). You can

porate stock, if they apply.

trusts in Regulation 1.664(e)(6), and other

use the factors for the month in which you

transfers in Regulation 20.2031–7(d)(6).

made the contribution or for either of the two

The value of the goodwill of the business

months preceding that month. See the earlier

should also be taken into consideration. You

Special factors. If you need a special factor

discussion on Annuities, Interests for Life or

should keep complete financial and other in-

for an actual transaction, you may ask for it by

Terms of Years, Remainders, and Rever-

formation on which you base the valuation.

writing a request for a letter ruling to the:

sions. Publication 1459 is available free by

This includes copies of reports of examina-

writing to the IRS address given under Special

Internal Revenue Service

tions of the business made by accountants,

factors earlier.

Associate Chief Counsel (Domestic)

engineers, or any technical experts on or

Attn: CC:DOM:Corp:T

For this purpose, the term ‘‘depreciable

close to the valuation date.

P.O. Box 7604

property’’ means any property subject to wear

Ben Franklin Station

and tear or obsolescence, even if not used in

Annuities, Interests for

Washington, DC 20044

a trade or business or for the production of

Life or Terms of

income.

Be sure to include the date of birth of each

If the remainder interest includes both de-

Years, Remainders, and

person, the duration of whose life may affect

preciable and nondepreciable property, for

Reversions

the value of the interest, and copies of the rel-

example a house and land, the FMV must be

evant instruments. IRS charges a user fee for

The value of these kinds of property is their

allocated between each kind of property at

providing special factors.

present value, except in the case of annuities

the time of the contribution. This rule also ap-

For information on the circumstances

under contracts issued by companies regu-

plies to a gift of a remainder interest that in-

under which a charitable deduction may be al-

larly engaged in their sale. The valuation of

cludes property that is part depletable and

lowed for the donation of a partial interest in

these commercial annuity contracts and of in-

part not depletable. Take into account depre-

property not in trust, see Partial Interest in

surance policies is discussed later under Cer-

ciation or depletion only for the property that is

Property Not in Trust, later.

tain Life Insurance and Annuity Contracts .

subject to depreciation or depletion.

To determine present value, you must

For more information, see section 1.170A–

Certain Life Insurance

know the applicable interest rate and use ac-

12 of the Income Tax Regulations.

tuarial tables.

and Annuity Contracts

Undivided part of your entire interest. A

The value of an annuity contract or a life insur-

Interest rate. The applicable interest rate var-

ance policy issued by a company regularly en-

contribution of an undivided part of your entire

ies. It is announced monthly in a news release

gaged in the sale of such contracts or policies

interest in property must consist of a part of

and published in the Internal Revenue Bulletin

is the amount that company would charge for

each and every substantial interest or right

as a Revenue Ruling. The interest rate to use

a comparable contract.

you own in the property. It must extend over

is under the heading ‘‘Rate Under Section

But if the donee of a life insurance policy

the entire term of your interest in the property.

7520 ’’ for a given month and year. You can

may reasonably be expected to cash the pol-

For example, you are entitled to the income

call the local IRS office to obtain this rate.

icy rather than hold it as an investment, then

from certain property for your life (life estate)

the FMV is the cash surrender value rather

and you contribute 20% of that life estate to a

Actuarial tables. You need to refer to actua-

than the replacement cost.

qualified organization. You can claim a deduc-

rial tables to determine a qualified interest in

If an annuity is payable under a combina-

tion for the contribution if you do not have any

the form of an annuity, any interest for life or a

tion annuity contract and life insurance policy

other interest in the property. To figure the

term of years, or any remainder interest to a

(for example, a retirement income policy with

value of a contribution involving a partial inter-

charitable organization.

a death benefit) and there was no insurance

est, see Publication 1457.

Use the valuation tables set forth in IRS

element when it was transferred to the char-

If the only interest you own in real property

Publications 1457 (Alpha Volume) and 1458

ity, the policy is treated as an annuity contract.

is a remainder interest and you transfer part of

(Beta Volume). Both of these publications pro-

that interest to a qualified organization, see

vide tables containing actuarial factors to be

Partial Interest

the previous discussion on valuation of a re-

used in determining the present value of an

in Property Not in Trust

mainder interest in real property.

annuity, an interest for life or for a term of

years, or a remainder or reversionary interest.

Generally, no deduction is allowed for a chari-

For qualified charitable transfers, you can use

Qualified conservation contribution. A

table contribution, not made in trust, of less

the factor for the month in which you made the

qualified conservation contribution is a contri-

than your entire interest in property. However,

contribution or for either of the 2 months pre-

this does not apply to a transfer of less than

bution of a qualified real property interest to a

ceding that month.

your entire interest if it is a transfer of:

qualified organization to be used only for con-

Publication 1457 also contains actuarial

servation purposes.

1) A remainder interest in your personal res-

factors for computing the value of a remainder

Qualified organization. For purposes of a

idence or farm,

interest in a charitable remainder annuity trust

qualified conservation contribution, a qualified

2) An undivided part of your entire interest in

and a pooled income fund. Publication 1458

organization is:

property, or

contains the factors for valuing the remainder

1) A governmental unit,

3) A qualified conservation contribution.

interest in a charitable remainder unitrust.

These are available for purchase by phone at

2) A publicly supported charitable, religious,

(202)512–1800 or by mail from the:

Valuation of a remainder interest in real

scientific, literary, educational, etc., or-

property, not transferred in trust. The

ganization, or

Superintendent of Documents

amount of the deduction for a donation of a re-

United States Government

3) An organization that is controlled by, and

mainder interest in real property is the FMV of

Printing Office

operated for the exclusive benefit of, a

the remainder interest at the time of the contri-

P.O. Box 371954

governmental unit or a publicly supported

bution. To determine this value, you must

charity.

Pittsburgh, PA 15250–7954

know the FMV of the property on the date of

Page 7

Determining The Value Of Donated Property Instructions - Publication 561 Page 7

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