Questions: Charity Lutherie

by Brian Flaherty

Originally published in American Lutherie #98, 2009

 

Christ Kacoyannkis from Springfield, Illinois asks:

I am an amateur luthier and I donated the last instrument I made to a charity. Can I deduct the value of the instrument on my taxes, or only the cost of materials?

Brian Flaherty, research librarian at the New England School of Law in Boston, Massachusetts responds:

Although I, like the GAL, cannot offer tax or legal advice, I can suggest the book The Tax Law of Charitable Giving by Bruce R. Hopkins, which includes this:

“An individual may make a contribution to a charitable organization of an item of property that was created by the donor, such as a painting or manuscript. The charitable deduction for this type of gift is not based on the fair market value of the property; instead, it is confined to the donor’s cost basis in the property. This tax result is occasioned by [IRC section 170(e)(1)(A)].”

The exception to this is if it’s your stock in trade — if it’s your business. Then you do have “fair market valuation” — which is the “price at which property would change hands between a willing buyer and a willing seller” (the language the court always uses to define “fair market valuation”). ◆