Know When to Value Bequests
April 18, 2016 | Accounting Standards, IRS Regulation, Tax Planning, Tax Preparation, Valuations
Donations from a will may not actually get to your organization for some time because of probate and estate administration. That raises the issue of what value and what date to use in issuing the official tax receipt. When a will contains a gift in kind to be donated, the timing for when the organization actually receives the gift can vary greatly.
Say, for example, your organization receives shares in a public company. Depending on the economy the value of shares could more than double during the months, or even years, the donor’s estate is being administered. The same can apply to works of art, antiques or heirlooms of precious metals or gems.
So, should you value the gift when the gift is actually in hand, or at the date of the bequest? The answer affects both the official receipt and then cost amount of the gift on your group’s books, so it is an important consideration.
According to the Income Tax Act, a gift by will is considered to be given immediately before the death of the donor. This lets the estate claim the tax credit on the donor’s final income tax return.
For your group’s accounting, this means issuing a receipt for the fair market value of the gift immediately preceding death.
Receipting can be a complex issue. Contact an accounting professional to discuss the best way to maintain your records.