Gifts of Personal Property
Tangible Personal Property Defined
Tangible personal property is defined as property that can be physically touched, excluding land and improvements (buildings and permanent structures). Examples of tangible personal property include antiques, artwork, precious gems and metals, and cars, boats and aircraft.
In contrast, intangible personal property is untouchable property, which may be evidenced by a physical piece of paper, i.e. a stock certificate or a promissory note. The physical paper merely signifies the ownership and value of the intangible property.
Most assets fall easily into one of the two categories. However, it is not as easy to determine the value of coin or currency with both a monetary and numismatic value. In tax law contexts other than the charitable deduction, such items have been viewed as tangible personal property.
Tangible personal property is frequently given on an outright basis, or as a testamentary gift through a donor's will or trust. However, it can also be transferred through split-interest planned giving vehicles such as charitable remainder trusts.
Review by the Air Force Academy Foundation
Prior to the Air Force Academy Foundation accepting a proffered donation of tangible personal property, careful review will occur to ensure adherence to the Foundation's gift acceptance policy. It is possible for the AFA Foundation, upon recommendation by the Gift Acceptance Committee, to decline a proposed gift for reasons including related use (see below) or being subject to excessive out-of-pocket expenses associated with the property's display, security, storage, insurance, conservation, or sale.
Although a personal property donation to the AFA Foundation may qualify the donor for an income tax deduction, there are many qualifiers to consider. Chief among them is the "Related Use Rule." The IRS stipulates that to claim the full fair-market value as a deduction requires the property to further a charitable organization's exempt purposes, which for the AFA Foundation means it must be useful to the Air Force Academy. Consequently, the AFA Foundation, as part of its review of a proffered gift, will seek confirmation from the Academy about the gift's suitability.
Once the AFA Foundation and Academy agree to accept a gift, the donor of the long-term tangible personal property may be eligible to take a charitable deduction to the extent of its fair market value, defined as:
"amount at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell, and both having reasonable knowledge of the relevant facts."
To claim a charitable deduction for the full fair market value of a donation, the taxpayer must comply with specific requirements, which are articulated in IRS Publication 526. The AFA Foundation does not dispense legal or tax advice; for specific guidance donors must consult with professional advisors.
If the contribution does not meet the related use rule, the donor receives a cost basis deduction.
If tangible personal property is gifted to the AFA Foundation through a charitable bequest in a will or trust, the estate tax charitable deduction is not subject to the related-use rule. Therefore, a testamentary bequest of tangible personal property is valued at its fair market value without regard to the AFA Foundation's use of the property. However, the AFA Foundation will review the prospective gift and may elect to decline the receipt of the bequest.