Under IRC §170(f)(11) a taxpayer who donates a contribution of property in excess of $5,000 must obtain a qualified appraisal of the property and attach it to his/her return in order to obtain a charitable contribution deduction. However, under IRC §170(f)(11)(a)(ii), no appraisal is required for readily valued property—and, cash would seem to be the best example of “readily valued property.”
But what if the cash, while being legal U.S. tender, consisted of collectible coins whose value was in excess of the face amount of the coins? Does the fact that the coins represented “cash” mean that no appraisal is necessary?
Chief Counsel Email 201608012 concludes that answer is no, such a contribution does require an appraisal if the taxpayer claimed a deduction for an amount in excess of the face amount for coins that represent legal tender.
The email reasons:
Section 170(f)(11) was enacted with the purpose of requiring qualified appraisals to ensure that contributions of property are not overvalued. See Staff of J. Comm. on Taxation, 108th Cong., General Explanation of Tax Legislation Enacted in the 108th Congress 461 (Comm. Print 2005) (“Congress believed that requiring C Corporations to obtain a qualified appraisal for charitable contributions of certain property in excess of $5,000 . . . would reduce valuation abuses.”); see also Staff of J. Comm. on Taxation, 98th Cong., General Explanation of the Revenue Provisions of the Deficit Reduction Act of 1984 502-510 (Comm. Print 1985) (Discusses how tax shelters were promoting inflated donation valuations, oftentimes using “independent” appraisals from promoters; notes that the qualified appraisal rules will “prove more effective in deterring taxpayers from inflating claimed deductions than relying solely on the uncertainties of the audit process and on penalties imposed on those overvaluations that detected on audit.”).
When the deduction claimed exceeds the face amount of the coins, there is a potential valuation issue, and therefore the “cash” exception to the appraisal requirements does not apply.