Our museum has an item on long-term loan that is potentially pretty valuable--a 200-yr old document.
We no longer wish to have this item in our custody unless it is gifted to us outright, and no longer on loan.
The gentleman who loaned it to us lives out of state and is considering donating the item to us, but is currently consulting with his attorneys to decide if he should gift the item to us (a non-profit museum) for tax deduction benefits or ask us to return it to sell the item elsewhere.
He is basing this decision on appraisals done by a company that has not seen the object in question in person for nearly 20 years (the length of time it has been on loan to us), and only has photographs to go by. These appraisals were paid for by the potential donor.
Our museum does not do appraisals, nor can we afford one of our own, so we have no way of knowing if the item is worth what he says it is. Is there any potential legal ramification to us if we decide to accept the item into our collection as a donation with the value he has listed (around $20,000)- i.e. in a situation like a tax audit?
This question had me on the edge of my seat until the very end.
WHAT is this 200-year-old document?
WHO is this mysterious lender?
WHAT does the original loan agreement look like?
WHO took the 20-year-old photos?
Sadly, it's possible I'll never know the answers to these questions since none of that information is required to answer the member's question.
Is there any potential legal ramification to us if we decide to accept the item into our collection as a donation with the value he has listed (around $20,000)- i.e. in a situation like a tax audit?
The answer is: maybe, but no big deal.
"No big deal"?
Yep. Here's why:
For a donor to claim a federal income tax deduction based on the fair market value of a donated object, the donor must back up the claimed amount with a recent appraisal. But the form the donee must sign to acknowledge the gift expressly says:
This acknowledgment does not represent agreement with the claimed fair market value.
So, unless there are enough circumstances to suggest that things are fishy or outright fraudulent, a donee accepting a gift and signing a tax form to enable a donor to claim a deduction puts the risk of inaccuracy on the donor.
There are other reasons, aside from concerns from the IRS audit, that merit caution in a scenario like the one described by the member.
When a museum that relies solely on the representation of a donor as to the value of a donated object in their collection, the insurance coverage on that object, which should be based on the value of a collection, is based on third-party information. In a worst-case scenario, that could mean an insurance claim is based on what turns out to be inaccurate information. And of course, clear eyes and scrutiny are warranted when part of a donation's value is because of history and/or provenance.
Assessing value might also be part of a museum’s overall evaluation of whether an object fits within the institution's mission and collection management policy. So even if an independent appraisal isn't possible, having a policy of insisting on one for donations in excess of a certain value might be a good policy...and one that, for special circumstances, could be waived.
As with any transaction, there absolutely could be "legal ramifications" for accepting a document worth $20k+, but in and of themselves, those factors shouldn't pose an impediment to accepting such a gift.
Thanks for a great question.
For more information on gift acceptance, income tax deductions, and appraisals, visit the IRS at: https://www.irs.gov/instructions/i8283#en_US_202112_publink62730rd0e827
 The appraisal should be done within 6 months of the donation.
 Or a donor could be sought to cover the costs
 Art and a few other things require the appraisal to be attached. For more on that, see the IRS guidance linked above.
Tags: Archives, Donations, Historical societies and museums, IRS, Taxes