I have a client who has made 18 donations to Goodwill for clothing and household items. Each donation has been under $2500 but the total for all of them is $14,000. Am I correct that you need to aggregate all of the donations as if they are one and get an appraisal?
Are you really buying that their crap (used stuff) is worth $14K?
If yes they need an appraisal.
Or they could deduct less than $5K.
This client is a new client. Their prior CPA has been deducting these noncash donations for years even though the total has been over $5000. They have put it in Section A on Form 8283 instead of Section B. They show multiple donations under $2500 to Goodwill and put it under Clothing and Household Items. I can't believe they have never been audited especially since the clients are physicians.
We had a lady come in with a mitt full of donation slips a number of years ago. She had been doing it for years deducting obscene amounts. We explained the rules and explained that we don’t play that game. Not surprisingly, she isn’t a current client.
Have them list a bunch of the most valuable items and have them (or you) use It's Deductible. It will help them see the "worth" of the stuff they gave away. Just a few of the big ticket items should help you and them do a validity check on their stuff.
I am trying to see if you can group clothing together and group household items together and deduct each of them at $4999. I thought maybe that is what the prior CPA was doing. Or it could be that he is just completely clueless.
"Or it could be that he is just completely clueless"
Not all CPAs are created equal. If some us us were surgeons instead of CPAs, there would be a lot more names showing up in the obituaries every morning.
I am certain that two listings at $4,999 won't look at all suspicious...
https://www.irs.gov/pub/irs-pdf/i8283.pdf
"Similar Items of Property" is defined there.
And the Goodwill FMV per clothing item is running about $5 each. That means they gave at least 1,000 items of clothing, which I guess would be annually for a family of, oh, maybe 12 or so kids, because kids grow out of stuff and no one in the family wants hand-me-downs? Even a bike or computer desk or coffee table or microwave are $10. And a general rule is 30% of what you paid new. That means they give away $42k of stuff every year? Whew; I want to be at their next yard sale.
Apparently, they have been doing it this way for years and the prior CPA never had a problem with it. I am surprised they have never been audited.
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