@Wayne Brooks thanks :)
@Edward B. if it were as easy as looking up the assessed value on the local assessor's database, everyone would utilize this strategy.
I'm not saying it can't be done, but the guy selling the course seems to be delivering misleading information. I just want to make sure you have a good idea of the steps to write off donated real estate prior to purchasing his course.
When you donate property and claim the FMV is greater than $5,000, you must obtain a qualified appraisal. In addition, you must attach said appraisal to your return and the appraiser must sign Form 8283 for you, which you will also attach and file with your return.
Below is text from Pub 561. Please note that you cannot use text in an IRS Pub to substantiate a tax position, but it gives a good overview of the requirements. Please also note that the appraiser may utilize the assessed value in his appraisal of the property, but unless you are an appraiser, you are out of luck. Maybe the guru is an appraiser?
Real Estate Because each piece of real estate is unique and its valuation is complicated, a detailed appraisal by a professional appraiser is necessary.
The appraiser must be thoroughly trained in the application of appraisal principles and theory. In some instances the opinions of equally qualified appraisers may carry unequal weight, such as when one appraiser has a better knowledge of local conditions.
The appraisal report must contain a complete description of the property, such as street address, legal description, and lot and block number, as well as physical features, condition, and dimensions. The use to which the property is put, zoning and permitted uses, and its potential use for other higher and better uses are also relevant.
In general, there are three main approaches to the valuation of real estate. An appraisal may require the combined use of two or three methods rather than one method only.
1. Comparable Sales
The comparable sales method compares the donated property with several similar properties that have been sold. The selling prices, after adjustments for differences in date of sale, size, condition, and location, would then indicate the estimated FMV of the donated property.
If the comparable sales method is used to determine the value of unimproved real property (land without significant buildings, structures, or any other improvements that add to its value), the appraiser should consider the following factors when comparing the potential comparable property and the donated property:
- Location, size, and zoning or use restrictions,
- Accessibility and road frontage, and available utilities and water rights,
- Riparian rights (right of access to and use of the water by owners of land on the bank of a river) and existing easements, rights-of-way, leases, etc.,
- Soil characteristics, vegetative cover, and status of mineral rights, and
- Other factors affecting value.
For each comparable sale, the appraisal must include the names of the buyer and seller, the deed book and page number, the date of sale and selling price, a property description, the amount and terms of mortgages, property surveys, the assessed value, the tax rate, and the assessor's appraised FMV.
The comparable selling prices must be adjusted to account for differences between the sale property and the donated property. Because differences of opinion may arise between appraisers as to the degree of comparability and the amount of the adjustment considered necessary for comparison purposes, an appraiser should document each item of adjustment.
Only comparable sales having the least adjustments in terms of items and/or total dollar adjustments should be considered as comparable to the donated property.
2. Capitalization of Income
This method capitalizes the net income from the property at a rate that represents a fair return on the particular investment at the particular time, considering the risks involved. The key elements are the determination of the income to be capitalized and the rate of capitalization.
3. Replacement Cost New or Reproduction Cost Minus Observed Depreciation
This method, used alone, usually does not result in a determination of FMV. Instead, it generally tends to set the upper limit of value, particularly in periods of rising costs, because it is reasonable to assume that an informed buyer will not pay more for the real estate than it would cost to reproduce a similar property. Of course, this reasoning does not apply if a similar property cannot be created because of location, unusual construction, or some other reason. Generally, this method serves to support the value determined from other methods. When the replacement cost method is applied to improved realty, the land and improvements are valued separately.
The replacement cost of a building is figured by considering the materials, the quality of workmanship, and the number of square feet or cubic feet in the building. This cost represents the total cost of labor and material, overhead, and profit. After the replacement cost has been figured, consideration must be given to the following factors:
- Physical deterioration—the wear and tear on the building itself,
- Functional obsolescence—usually in older buildings with, for example, inadequate lighting, plumbing, or heating, small rooms, or a poor floor plan, and
- Economic obsolescence—outside forces causing the whole area to become less desirable.
Deductions of More Than $5,000 Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser, and you must attach Section B of Form 8283 to your tax return. There are exceptions, discussed later. You should keep the appraiser's report with your written records. Records are discussed in Publication 526.
The phrase “similar items” means property of the same generic category or type (whether or not donated to the same donee), such as stamp collections, coin collections, lithographs, paintings, photographs, books, nonpublicly traded stock, nonpublicly traded securities other than nonpublicly traded stock, land, buildings, clothing, jewelry, furniture, electronic equipment, household appliances, toys, everyday kitchenware, china, crystal, or silver. For example, if you give books to three schools and you deduct $2,000, $2,500, and $900, respectively, your claimed deduction is more than $5,000 for these books. You must get a qualified appraisal of the books and for each school you must attach a fully completed Form 8283, Section B, to your tax return.
Exceptions. You do not need an appraisal if the property is:
- Nonpublicly traded stock of $10,000 or less,
- A vehicle (including a car, boat, or airplane) for which your deduction is limited to the gross proceeds from its sale,
- Qualified intellectual property, such as a patent,
- Certain publicly traded securities described next,
- Inventory and other property donated by a corporation that are “qualified contributions” for the care of the ill, the needy, or infants, within the meaning of section 170(e)(3)(A) of the Internal Revenue Code, or
- Stock in trade, inventory, or property held primarily for sale to customers in the ordinary course of your trade or business.
Although an appraisal is not required for the types of property just listed, you must provide certain information about a donation of any of these types of property on Form 8283.