Entering gifts in kind when donor does not place a value on gift

Patty Neumeier:

 If I understand gift in kind donations correctly, the donor is supposed to place a value on the gift if they want to use the donation as a tax deduction.  This is the value we put into RE as the gift.  But what is best practices if someone gives something and really does not want any kind of acknowledgement, and won't be taking a tax deduction?  We could try to estimate value, but since we are doing that, do you put that value into the donor's record?  Maybe we aren't processing these gifts correctly...

The donor does not need to value the item when they donate it.  The only time they need to value it is if they want to claim it as a donation for a tax deduction.  And for us this has nothing to do with what is entered in RE.  It is between them and the IRS.

 I've had to spend a lot of time looking into this the past year due to donations made to org and org events last fall.  We do have a line for item value on our donation form with space to mark if valuation is made by donor or price on item/receipts.  I find people often significantly over-value items when donating to a non-profit.  Fair Market Value should be more like a thrift store value. 

I have a number of GIK entered in RE with $0 value.  Reference or note field has as much of detailed description as possible.  I've had people who say they don't need a receipt.  We just send our standard GIK thank you letter which does list donated item(s) at bottom for all GIK.  There is no value stated in the letter. (With an exception of one donor who said they had to have it so we put statement to the effect that they had valued it at $XX and donor should consult tax advisor regarding tax deductibility for any gifts.) 

If you want to research this, see IRS publications 526, 561 and1771. 

 

 

Patty Neumeier:

 Thanks for responding, JoAnn.  So are you telling me that you put a value in the constituent's record, regardless if they want/need recognition, or if they give a value that is not correct?  For example, someone donated a piece of equipment to us and stated that is was worth $250 because they didn't want to bother with trying to find out the actual FMV.  We know it's worth much more--$2-3K.  Which value would you enter into RE?  I'm not comfortable putting in a value that the donor doesn't agree with?  I know for GAAP purposes, we have to recognize it at FMV, but I don't know if that is what goes into RE record, since donor obviously doesn't want gift recognition for the actual value.

Patty, No I'm not saying I put a value in the record other than $0.  Our standard practice is to receipt/thank you for all donations.  We've found donor may say they don't want recognition but that doesn't mean they don't want a receipt and we consider a thank you to always be appropriate.

I don't think I've ever had donor undervalue their donation.  If someone is donating something truly worth $2-3K, to me you have other issues to consider.  At that value, should the item be appraised?  Does the donor intend to record the GIK as a charitable donation on their taxes (and if they do, why wouldn't they want to be able to deduct FMV)?  Does that value mean it becomes a company asset and needs valuation for accounting/insurance purposes. 

On the donor record I record any information available about a GIK: quantity, brand/manufacturer, model, serial #, size, color, condition, etc.That information is what is listed on the thank you/receipt.  No $ amount or FMV.  That is all that is required by law - description.

I'm not a tax expert at all.  I've just done a fair amount of research for our org on it so we can handle GIK donations properly. 

In your situation with a $2-3K estimated value - I'd check with your accountant/auditor just to be sure you're doing what you need to do.

 

You really have a gift value - which is $0, and a description of the item, and an accounting value so finance knows internally what to report to the IRS.

We get a regular influx of GIK and this is what we do, to satisfy our Finance Dept and Development team.



If the donor indicates a value, the gift is entered with the declared amount as the Gift & Receipt Amounts, a Gift Code of "Donor Declared Value of GIK," and a Gift Note with a Notepad Type "In Kind Description" and a short description in the Description field.



If the donor does not indicate a value, we do our best to determine the fmv and enter that as the Gift Amount, enter $0.00 as the Receipt Amount, a Gift Code of "Value Not Reported for GIK" and the same Gift Note.



For our Finance reports, they get a list of GIK with the Gift Amount, Gift Code (just as an fyi) and the Gift Note descriptions.  Our CFO has been happy with that, and if she or the auditors need more information about a specific gift, we can pull the paperwork (often there's a GIK form that the donor or staff member actually receiving the items fills out, or there will be some sort of paper/email trail).



For the acknowledgement letter, even if the donor doesn't want/need one, we use a receipt box at the bottom of the letter that includes all the relevant information.  The Receipt Amount and Gift Date are listed here, so if the donor didn't report a value, it shows as "$0.00."  Then there is a GIK statement, which is triggered by the Gift Code field.  For the donor-declared value, the receipt box will read:

"Standard fundraising practices do not permit us to provide a donor with valuation of a gift-in-kind; please consult your tax advisor on IRS requirements.  However, Beech Acres is pleased to recognize you commensurate with a gift of $x.xx, based on the value you reported."  (using the Receipt Amount)

For those that don't report a value, the receipt box on the ack letter will be just the first sentence of the above, stopping before "However,..."



If you need to not have a Gift Amount in RE for GIK, and your ack letters use the Receipt Amount as the merge field, you can simply enter $0.00 as the Gift Amount for other reporting.  If you need both fields to be $0.00, you can always add a Gift Attribute for GIK FMV with a currency field as the description.  I always err on the side of recording too much information, so if a donor declares a value, I'm going to include that somewhere on the record...sure as I don't, someone will come along needing that information.