Intangible Personal Property
Features & Benefits of Making Gifts of Intangible Personal Property
Charitable deduction. Generally, gifts of intangible personal property such as copyrights and patents which you have owned for more than one year are deductible as charitable deductions on your income tax return at their full fair market value.
Deductibility. Such gifts are deductible up to 30% of your federal adjusted gross income for the year (and if your gifts of tangible personal property exceed that 30%, then you may deduct the excess over the following five years, again up to 30% of your adjusted gross income for each carry-over year). Of course, the underlying work which is the subject of the copyright, or the underlying process which is the subject of the patent, must accompany the gift.
Some important exceptions. There are important exceptions to the general rule regarding deductibility set forth above. Here are a couple of examples:
1. If a copyright is owned by the individual who created it or it was a gift from the creator, then the value of the gifted copyright for income tax charitable deduction purposes is limited to the fair market value of such copyright or the donor’s cost basis in the copyright – whichever is less. In such a case, the deductibility of the gifted copyright is 50% of the donor’s adjusted gross income, with a five-year carryover.
2. If the donor of a patent has been depreciating the patent over its life, the full fair market valuation allowed for the gift of a patent held for more than one year must be reduced by the amount of ordinary income the donor would have received if he had sold the patent. The same is true if a donor has taken depreciation over the life of his copyright.
How it’s done. Transfers of copyrights and patents are made by written transfer documents, which are obtained from and then recorded with the Register of Copyrights in the U.S. Copyright Office, or the U.S. Patent and Trademark Office, respectively. The date of recordation is the date of your gift. We’ll be glad to help you secure these transfer documents and help you record your gift.
Appraisal requirements. If the value of your charitable deduction for your gift of tangible or intangible personal property is greater than $500, your income tax return must be accompanied by a completed federal Form 8283/Noncash Charitable Contributions detailing your gift of such property – we will supply that to you. And if the value of such charitable deduction is greater than $5,000, you must obtain an independent qualified appraisal of your gifted personal property to accompany your Form 8283 in order to substantiate your income tax charitable deduction – we’ll help you get one.
Special note concerning personal property gifted by Bequest. The rules discussed above – especially those “related use” rules – only apply to gifts of personal property made during your life for which you seek an income tax charitable deduction. Gifts of tangible or intangible personal property made at your death through a bequest in your Will or Trust are fully deductible for estate and gift tax purposes at their full fair market value.
|P.O. Box 128 Buies Creek, NC 27506, 1-800-334-4111|