The Nonprofit FAQ

How long must you keep an in-kind gift?

Michael Williamson wrote in CharityLaw on May 29, 1999: Could someone gift me a brief synopsis on the IRS ruling regarding how long a 501(C)3 must keep an in-kind contribution of equipment. specifically, if a donor gives and automobile, how long do we have to hold that gift. Reply: There is no requirement that you hold it for a specific amount of time. If the property was appraised at $5000 or more and you signed Form 8283 (the apprasial summary) and if you dispose of the property within three years, then you must file Form 8282 with the IRS within 125 days of disposition and give a copy to the donor. For more information about this topic (including special rules for automobiles, conservation easements, and other specific types of property), see http://www.irs.gov/charities/contributors/article/0,,id=182838,00.html Laura Peebles added: There are two other issues to think about here: 1. The IRS has publicly announced that it will be targeting certain charities that are advertising for used cars. In certain cases they appear to be running "used car sales lots" and/or have agreements with junkyards. The charities have been implying that the donor could deduct the Blue Book value rather than the true Fair Market Value (FMV) of some very used cars. 2. If the donor has given you appreciated personal property (rather than *depreciated* property--which covers most cars) you must actually use the property as part of your exempt function for the donor to be entitled to a deduction for FMV rather than their cost. Put another way--donate a painting to a museum, get a FMV deduction. Donate to your high school auction, get a donation for cost only. (Note that Goodwill and similar charities actually use the donated property to train and rehabilitate the people who work there.) Sharon M. Kelly (skelly@hodgsonruss.com) added: Re: the UBIT issue, I would say income from sale of refurbished cars is NOT subject to UBIT. Work on the cars by students of automotive repair etc. would be substantially related to the college's exempt purpose of education. There is a provision somewhere in the UBIT regs. that says income from sale of a product is not UBIT if producing the product is a related activity (unless the scale of production exceeds that needed to accomplish the exempt purpose). Where an organization's exempt purpose includes education and training, many activities that might otherwise generate UBIT can be treated as related, e.g. items manufactured as part of exempt training, catering services provided by an exempt entity involved in culinary job training, etc. Lisa Rundquist supplied a version of the first part of this answer, which was edited to give the exact form numbers and the IRS WWW address -- PB 5/29/99