According to Steve Leimberg there is a very good reason to donate art. In fact there are 10 good reasosn and here they are:

Why Donating Makes Sen$e

Donating art, antiques and other collectible objects to appropriate qualified organizations may provide you with benefits such as:

• An immediate income tax deduction
• Avoidance of the tax on capital gains on appreciated assets
• An estate and gift tax deduction
• The creation of a lasting legacy with their organization of choice

TIP #1: Donate Appreciated Objects

You generally will receive a higher income tax deduction if you donate an art object or collection that has appreciated in value over the time they have owned it. This is called capital gain property. Generally, property is capital gain property if its sale at fair market value on the date of the contribution would have resulted in long-term capital gain. Capital gain property includes capital assets held more than one (1) year. The general rule is that you can usually deduct the full fair market value of the donation as of the date of the contribution.

TIP #2: Donate Long-Term Capital Gain Objects

The amount you can deduct for a contribution of ordinary income property is generally only your basis (cost) in the property, not the full fair market value. Property is ordinary income property if its sale at fair market value on the date it was contributed would have resulted in ordinary income or in short-term capital gain. Examples of ordinary income property are business inventory, works of art created by an artist donor, manuscripts prepared by the donor, and capital assets held one (1) year or less.

The deduction for appreciated long-term capital gain property is its full fair market value. The deduction for ordinary income property is the lesser of fair market value or its basis. The long and short of it is that as an investor or purchaser of the art you can take advantage of the fair market value of the art.

TIP # 3: Donate to a Public Rather Than Private Charity

In order to maximize your charitable deduction benefits, the qualified organization must be a public, not private, charitable organization.

In general, qualified public charitable organizations include nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals. You can ask the organization whether it is a qualified organization, and most will be able to tell you. Or, you can check IRS Publication 78, which lists most qualified organizations.

In most cases, you will only receive a deduction of his or her cost for a contribution of appreciated art objects to a private charity. However, for that same donation you would be allowed a deduction of the full fair market value if the contribution was made to a public charity.

TIP #4: Make Sure the Public Charity meets the "Related Use Rule"

The "related use rule" applies to capital gains property that is tangible personal property (objects) contributed to a public charity. The related use rule requires that the use of the art object by the organization be related to the purpose or the function constituting the basis for the organization's charitable exemption under IRC Section 501.

This means that the donated object must be of a type normally retained and exhibited by that charitable organization, such as a museum or educational institution that normally has a collection of similar paintings, or silver, or sports memorabilia. All of the appreciated value of the donated art object will be lost as a charitable deduction if the related use rule is not satisfied.

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TIP # 5: Verify Acceptance of the Donation by the Qualified Organization

Make sure your designated public charity wants the object. The organization should provide a written acceptance indicating that the organization is a qualified public charity, and that it satisfies the related use rule regarding the particular donation and intends to use the gift in a manner related to its tax exempt status.

TIP #6: Consider a Partial Interest Donation

In certain circumstances, a gift of a partial interest in an art object or collection may be desirable. Here, as an example, Ms. Donor donates a percentage of ownership of her painting, while retaining the remaining portion of ownership for herself, with the promise that full ownership will ultimately go to the charitable organization at a future date of her choice, such as the donor's date of death.

In cases like this, the receiving charitable organization would retain possession of the painting based upon its percentage of ownership. If a gift of a one-third (1/3) interest was given, and Ms. Donor retained the remaining two-thirds (2/3) interest, then the charitable organization would have possession of the painting for four (4) months of each year, and Ms. Donor would have possession of the painting for the remaining eight (8) months. The charitable organization would ultimately acquire the entire interest at the designated future date.

Ms. Donor's benefit in gifting the partial interest would be the allowable income tax deduction of one-third (1/3) of the fair market value of the painting at the date of donation. Additionally, Ms. Donor would have the continuing use and enjoyment of the painting for eight (8) months of each year.

Ms. Donor would also be able to make another additional partial interest donation to the same museum in the future, such as a second donation of another one-third (1/3) interest in the painting five years later. This time, the second gift of another one-third (1/3) interest in the painting may have a higher fair market value at the time of donation, not only because of the passage of five years time, but also because the provenance of the painting now includes its history as part of the collection of the museum!

This would now leave the museum with a two-thirds (2/3) interest in the painting, and possession for eight (8) months of the year, and Ms. Donor with a second income tax deduction and the use and enjoyment of the painting for four (4) months of the year until the ultimate transfer of the entire remaining interest at the designated date. here you must be careful that has been recent law passed by Congress that may restrict your use of this option.

TIP #7: Consider a Charitable Bargain Sale

A bargain sale of personal property to a qualified charitable organization (a sale or exchange for less than the property's fair market value) is partly a charitable contribution and partly a sale or exchange.

With the bargain sale, you sell your art object or collection to the charitable organization at less than fair market value. The transaction gives your client cash, plus a charitable income tax deduction for the difference between the fair market value of the gift and the amount the charity paid your client.

Generally, if the art object sold was capital gain property, your charitable contribution is the fair market value of the contributed portion.

The bargain sale is the only donation plan that can give your client both a lump sum of cash, and a charitable deduction.

TIP # 8: Retain a Qualified Appraiser to Prepare a Qualified Appraisal

Contributions of art objects and other personal property are reported on IRS Form 8283, Section A, for all contributions for the year over $500.00.

For deductions of art objects and other personal property over $5,000.00, Form 8283 Section B must be completed. This is signed by the donor, the donee and the appraiser. The donor must also obtain a separate qualified written appraisal of the donated property from a qualified appraiser.

The weight given an appraisal depends on the completeness of the report, the qualifications of the appraiser, and the appraiser's demonstrated knowledge of the donated property.

The appraiser must include in his or her appraisal the qualifications of the appraiser who signs the appraisal, including the appraiser's background, experience, education, and any membership in professional appraisal associations. The term "qualified appraisal" means an appraisal prepared by a qualified appraiser not earlier than sixty (60) days before the date of the contribution of the appraised property.

Any charitable contribution of an item of property, the claimed value of which exceeds $5,000.00, requires the donor to meet the following requirements:

Generally, the donor does not need to attach the qualified appraisal itself, but the donor should keep a copy as long as it may be relevant under the tax law.

If you donate art objects valued at $20,000.00 or more, however, the client must attach a complete copy of the signed qualified appraisal.

TIP #9: Recommend Requesting a Statement of Value if your Client is Considering Donating an Object of Art that has been Appraised at $50,000.00 or More.

If you are considering donating an object of art that has been appraised at $50,000.00 or more, you can recommend that he or she request a Statement of Value for that object from the IRS. The IRS user fee, which must be submitted with the request, is $2,500.00.

The donor must request the statement before filing the tax return that reports the donation. If the donor's request lacks essential required information, the donor will be notified and given 30 days to provide the missing information. This helps in avoiding penalties. For a request submitted, the IRS will issue a Statement of Value that can be relied on by the donor of the object of art.

TIP #10: Obtain the Advice and Assistance of Attorneys and CPAs Experienced in Charitable Donations of Personal Property Objects Such as Art, Antiques, and Other Collectibles

The total value of your charitable contribution deduction and certain other itemized deductions may be limited, depending upon your adjusted gross income and the amount and type of donation.

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