Tax considerations for gifts

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Income tax charitable deduction
Most gifts of art qualify for an income tax deduction based on their fair market value on the date of the gift. In order to qualify, a donor must have owned the work of art for a period of 12 months or more. Please note that donors may deduct these types of gifts up to 30 percent of adjusted gross income. Under most circumstances, donors have five years after the year of the gift to deduct any excess value not deducted initially.

Exceptions for deductions
For artists, or for those who own a work of art as a gift from an artist, a deduction is limited to the cost of the artist’s materials. If a work of art is received from an artist by bequest, one may deduct the fair market value of the work of art. Art dealers are limited to a deduction based on the art's value as inventory.

Estate tax deduction
An executor may deduct a bequest of art from the value of a taxable estate.

Related use
A gift to the Museum must be a work of art the Museum wishes to accession. The Museum cannot accept works of art as gifts for immediate sale. The IRS scrutinizes gifts to ensure that they are used in a related manner, and the actual, not the intended, use will determine whether property is put to a related use. If the Museum does sell a work of art within three years of accepting it, the Museum files a Form 8282 with the IRS notifying them of the sale.

Appraisal rules
Donors must file IRS Form 8283 if the total amount of deductions for all non-cash gifts in one year exceeds $500.

If all the gifts of art a donor gives in one year have an aggregate value of more than $5,000, an independent qualified appraiser must place a value on the gifts no earlier than 60 days before the deed of gift is signed and no later than the filing date of the tax return. The appraiser completes Section B, Parts I and III of the form; the donor completes the personal information and then sends the form to the Milwaukee Art Museum. The Museum completes Section B, Part IV and returns it.

If anyone gives art that is valued at more than $20,000, the donor must attach a copy of the appraisal to Form 8283 and be prepared to submit an 8 x 10 inch color photo of the work or a color transparency no smaller than 4 x 5 inches, if requested by the IRS.

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