I donated a large amount of brand new in box toys (6 different toys) from my Sole Proprietor Business that I dissolved last year. MSRP value $15,029 with an investment of around 1k.
I researched the Fair Market Value by what online sellers have them listed at, and I estimated the FMV on the low side at $5,565.
The problem is that for noncash donations over $5,000 we are required to have a professional appraisal. And I would be fine with valuing them at $4,999 to avoid an appraisal but, my boss, (an attorney) thinks I should have valued the toys much higher.
I would love to reduce my taxable income as much as possible, so my question is, does anyone with Indiana tax knowledge know if there’s another way to claim the donation for closer to 7k that I’m unaware of? Or would it not make much of a difference to just keep the value at $4,999?
I donated the items yesterday so it’s probably too late for an appraisal. And I assume that even though they are different items, they are considered “Similar Items of Property“ so I can’t value them separately.
NonCash Charitable Contributions in Indiana
byu/jaznewlin intax
Posted by jaznewlin
4 Comments
Your deduction is limited to what you paid for the items. Not what you sold it for. That is because these were items held for inventory.
Had you deducted the purchase of these items at any time for your business? Or did you hold them as an asset with cost of goods sold tracked?
You bought stuff for 1k and you can sell it for 15k. Is there a reason why you don’t want to stay in business? That’s an amazing ROI.
It sounds like you might not be able to deduct them at all. If you claimed the 1k investment in them as a business expense then your basis in these items is $0 right now.
As for your estimate of their value… I could find a rock on the side of the road and value it at a million dollars, but if I tried to do that the IRS would invite me to find a buyer and realise that million dollars. Since your business failed they might be as sceptical of your valuation on them, too, since they would wonder why you didn’t just sell them for the 15x return on investment (which would be insanely good.)
It’s kind of like people who put a lot of money into aftermarket car mods and then expect a buyer of their car to care.
Without the appraisal you are limited to $500 total.