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Gift in Kind - Construction Costs/Materials

Diana Hunt

Hi everyone. I'm hoping this meets the general discussion criteria. We are trying to create a gift agreement that would apply for in kind gifts where what is being donated are time/costs of materials and costs of construction. Because contractors will be contributing tangible construction goods and services to a long lived asset my understanding is that they can take the fair market value of the asset/contribution and choose to deduct that. These donations should have a tax deduction value if they can establish the FMV (fair market value)? I just want to ensure whatever we receipt them and represent to them as the likely outcome is correct. We always tell people to consult with their own tax advisors, but since we’ll be having a general contractor help to solicit donations from sub-contractors we want to provide them with the correct language/expectations of what documentation we’ll need to book the gifts.

Does anyone out there have a form or language that you could share?

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Comments

JoAnn Strommen

I know the university has one - but I'm not finding one that I can get to right now. I know GIK valued at over $5000 require appraisal/documentation, form 8283 may be required. You can see some examples of forms by google search.

Just to clarify, when you say "contributing tangible construction goods and services" do you know that only the tangible good value can be claimed for tax purposes by the provider? Ex. Painting company paints rooms for us. Only value of paint (and that's figured at their tax basis) can be claimed. Labor costs are not allowed to be claimed for tax purposes. While you may include them internally in the value of the service provided.

Diana Hunt

JoAnn,

I think that's where our gift officer feels like there should be something different than tangible vs service, because the donation may be hundreds of thousands of dollars. She is breaking it down between fair market value and the amount the donor may give us in a zeroed out invoice that we can use for recognition, etc. In this case the 8283 doesn't seem to feel quite right either. We are not accountants and for tax purposes the donor will have to deal with their tax preparers, but in trying to offer guidance as to whether they will be looking at simply cost of materials for a donation of a contractors gift of an entire wing of a building, something that is more substantial than a piece of art or painting of a room we are wondering it that is considered different somehow. Would the contractor need an appraisal of their work?

JoAnn Strommen

I haven't dealt with tangible vs. service much beyond painting/very minor work projects and donations of services for auctions. I'm guess as I'm not accountant or tax export in any way that they would need some kind of documentation for value.

If I were in your shoes I would contact your org's auditor/tax consultant/legal rep for their input. Yes, you'll want to be clear from the onset. Great potential donation!

Betty Sanchez

Donated construction services/labor are not tax-deductible. Only tangible materials may be deductible, usually at the donor’s cost basis, not FMV. Contractors cannot deduct the value of their time. The charity should not assign a value, only describe the donation and date. Donors substantiate value using their own records (e.g., invoices or construction estimation). Noncash gifts may require Form 8283. Always advise donors to consult their tax advisor.

Betty Sanchez

Hi! You’re correct that contractors can typically deduct the fair market value of donated materials and labor, but it’s always best to have them confirm with their own tax advisor. For documentation, you’ll want a clear gift agreement that specifies what is being donated, the estimated fair market value, and how it will be used. Providing detailed construction estimates for the donated work and materials can help both your organization and the donors justify the value and maintain proper records.