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Don't miss the chance to make a charitable IRA gift this year! If you are 70½ or older and own a traditional IRA, please consider making an IRA charitable rollover gift this year. A gift of up to $100,000 made from your IRA to us will:

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Protect Yourself From Fires and Hurricanes This Summer

On May 5, 2022, the Internal Revenue Service published a brief guide on tips to help you prepare for natural disasters. The month of May includes National Hurricane Preparedness Week and National Wildfire Awareness Month. Other natural disasters could include tropical storms, tornadoes, winds, floods, landslides and mudslides.

The month of May is an excellent time to begin reviewing your emergency preparedness plan. Part of that plan includes taking steps to protect personal documents and tax-related information.

1. Secure Key Documents — You should gather your tax returns, birth certificates, deeds to property and insurance policies and place them in a waterproof container or a secure location. Many individuals also create a duplicate of key documents and leave those with a trusted person or store them on an external drive.

2. Document Valuables — If there is a natural disaster, you could suffer the loss of valuable collections, furniture and other items in your home. You will have a much better opportunity to receive compensation from an insurance company or claim tax benefits for a disaster loss if you have good records. IRS Publication 584 includes disaster-loss workbooks that may help you compile lists of property.

3. Rebuild After a Disaster — If you do experience a disaster, you may need assistance from the government or your insurance company. If you have lost some or all of your tax records, the IRS has a webpage on " Reconstructing Records After a Natural Disaster or Casualty Loss" on www.irs.gov.

4. IRS Assistance — If the Federal Emergency Management Agency (FEMA) issues a disaster declaration for your area, the IRS often will postpone tax-filing and tax-payment deadlines. You do not need to call the IRS. The IRS computers can identify taxpayers who are located in covered disaster areas. If you have tax-related questions on a disaster in your area, contact the IRS at (866) 562-5227 to speak with a specialist. The IRS has trained staff who can answer disaster-related questions.

While individuals all hope not to be involved in a natural disaster, it could happen to you without notice. There are additional natural disaster preparations that will help protect you on www.irs.gov. There is also a webpage on the FEMA website with a recommended set of emergency supplies for a natural disaster. Check out "Build a Kit" on FEMA.gov for more information.

IRS and Taxpayer Contest Over Appraisal Rules


In Mart D. Green et al. v. Commissioner; No. 19634-19, the IRS filed a motion for partial summary judgment with the Tax Court. The motion related to a large charitable deduction claimed by the Hobby Lobby Stores, Inc. (HLSI). HLSI is an Oklahoma Subchapter S corporation. The shareholders of HLSI formed a Section 501(c)(3) organization with the title "Museum of the Bible, Inc." (MOTB). The controversy between the IRS and HLSI concerns gifts of documents in 2011 and 2012. HLSI obtained appraisals to substantiate the charitable deductions, but the appraisals did not report the cost basis and value of each of the over 1000 donated items. In addition, there were outside advisors on the appraisals who did not sign IRS Forms 8283.

HLSI purchased over 1000 documents and other items between 2008 and 2011. It transferred 439 items to MOTB in 2011. The charitable deduction was $23,038,000 and the combined adjusted basis was $1,753,432. The 800 items transferred in 2012 produced a charitable deduction of $61,633,000 with a combined adjusted basis of $18,749,758.

The IRS Forms 8283 were signed by appraiser Lee Biondi. The appraisals included the aggregate values and cost bases. They claimed that they were in full compliance with the applicable appraiser requirements. However, the 2011 appraisal did not include "any information regarding the purchase, purchase price, or date of acquisition of the individual 431 donated scrolls, sufficient to establish the cost or adjusted basis of each of the individually contributed items."

The appraisal further stated, "This appraisal makes no warranty as to the authenticity of the property appraised and relies on the established expertise of the professional scholars of Hebrew, the certified Rabbinical experts and Hebrew script paleographer's hired to professionally analyze and describe the scrolls."

Appraiser Biondi consulted with rabbis who had expertise in determining the value of ancient scrolls and manuscripts. Two outside appraisers also reviewed 11 books and manuscripts that were valued at $6,050,000 and did not sign the appraisal summary.

If a charitable donation includes a group of "similar items of property," such as a collection of items, the value is aggregated to determine appraisal requirements under Reg. 1.170A-13(e). If the donor contributes similar property to one donee, one appraisal summary may be attached. However, Reg. 1.170A-13(c)(4)(iv) states that there must be specific information "for each item of property." Because the individual items were not listed, the IRS determined that the "charitable deductions for tax years 2011 and 2012 should be completely disallowed for failure to include the cost or adjusted basis and dates of acquisition of the individually contributed items of property."

The IRS also maintained that the strict compliance standard should be applicable to appraisal requirements, and therefore the failure to itemize the 1,000 items required denial of the deduction.

In addition, Reg. 1.170A-13(e)(4)(i) indicates that "each appraiser shall comply with the requirements of this paragraph (e), including signing the qualified appraisal and appraisal summary."

Because the appraisal did not include the signatures of the other individuals who participated in the valuation, the IRS determined that the deduction should be denied. It also claimed that there was not a sufficient level of disclosure to constitute substantial compliance.

Editor's Note: This motion for summary judgment is a good analysis of the IRS requirements for appraisals of property, especially where there are groups of similar items. This case will certainly be the subject of a Tax Court decision. However, this motion is a valuable guide for donors and professional advisors who want to ensure that proper appraisals IRS Forms 8283 are filed for gifts of property.

IRS Claims No Harm from Destruction of 30 Million Paper Returns


With the pandemic in 2020 and 2021, the IRS was inundated with paper returns and was far behind in processing paper documents. As a result of the lockdown during the pandemic, the IRS was so far behind that a decision was made to destroy approximately 30 million documents that the IRS believed would not have "adverse effects on taxpayers."

The IRS stated "There were no negative taxpayer consequences as a result of this action. Taxpayers or payors have not been and will not be subject to penalties resulting from this action."

A Treasury Inspector General for Tax Administration (TIGTA) report noted that the IRS was faced with a difficult situation in 2021. It needed to update its computer systems in order to process tax returns for that year.

Tax professionals were concerned that there may still be clients who will be affected by the destroyed documents. They were not pleased with the IRS explanation that it processed 3.2 billion information returns in 2020 and the 30 million destroyed documents were a small fraction of the total.

The TIGTA report notes that the problem was "antiquated IRS technology." Most of the destroyed documents were information returns documents, consisting in large part of Forms 1099.

The IRS prioritized Forms 941, "Employer's Quarterly Federal Tax Return" and determined that it would be necessary to destroy the other documents so more important items could be handled by IRS staff.

IRS Commissioner Charles Rettig has indicated that the IRS processing centers are now open and he is committed to returning the IRS to normal operations.

Applicable Federal Rate of 3.0% for May — Rev. Rul. 2022-9; 2022-18 IRB 1 (17 Apr 2022)


The IRS has announced the Applicable Federal Rate (AFR) for May of 2022. The AFR under Section 7520 for the month of May is 3.0%. The rates for April of 2.2% or March of 2.0% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2022, pooled income funds in existence less than three tax years must use a 1.6% deemed rate of return.

Published May 13, 2022

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