The IRS gifted us with a new, slightly reformatted and reorganized Form 8283 in December, although the substance is not much changed. We also just received new Instructions for the form last month (breaking news!). Many of you may know that my law partner, Ellen Fred, and I regularly co-present a workshop on Form 8283 and Gift Letters at the Land Trust Alliance’s annual conference, Rally. It may seem silly to dedicate an entire 1.5-hour session to one tax form, but Form 8238 is a required component of any conservation easement for which a charitable tax deduction will be claimed. If the Form 8283 is not attached to the taxpayer’s tax return or is improperly completed, the IRS will challenge the deduction. It is important to get it right, as there have been several conservation easement cases in the past few years (see discussion here and here) regarding the proper completion of the form and whether the gift has been properly substantiated under the Treasury Regulations.
Form 8283 only pertains to non-cash donations, and compiles information about the various types of tangible, intangible, and real property for which the taxpayer intends to claim a deduction. In each tax year, if a taxpayer donates more than $500 worth of property and intends to claim a tax deduction, then the taxpayer must attach a Form 8283 to the taxpayer’s tax return for the year of the claim, including carryforward years. Virtually all conservation easement gifts will be valued at more than $500 if there is a gift component to the transaction.
The IRS tinkered with the Form 8283 regularly up until 2014 and then took a break for a while, until an update in late 2019, and now again in December 2020, to address the new noncash gift substantiation rules in Section 1.170A-16 of the Treasury Regulations. The 2019 update (1) clarified the description of potential penalties in the Appraiser’s Declaration in Part IV and (2) expanded Section 3(b) of Part I to include “real property” in a form field that previously only required the taxpayer to describe “tangible personal property.”
The 2020 changes include:
- Adding a new category of property—clothing and household items—in Section B Part I: Information on Donated Property over $5,000.
- Compressing the space permitted to describe the property in Section B Part I (unfortunate for those of us with lengthy conservation easement descriptions!)
- Adding the requirement to “attach a separate statement” for bargain-sales in Section B Part I Line 3 Column (g). It is unclear whether the bargain-sale separate statement can be combined with the separate statement required to be attached for conservation easements. A conservation easement’s separate statement will detail any bargain-sale component when breaking down the amount of the claimed contribution, so it seems like they should be able to be combined.
- Moving the section on “Partial Interests and Restricted Use Property” to Part B, Donated Property over $5,000, which makes a little more sense than its prior location in Part A, Donated Property of $5,000 or less. The way the form was drafted previously implied that higher value partial interests did not need to be documented in the form.
- Further clarifying that the “Partial Interests and Restricted Use Property” section does not apply to qualified conservation contributions, a.k.a. conservation easements.
- Addition of a “Name” field in the Declaration of Appraiser, Section B Part IV.
- Noting in the Instructions the new qualified appraisal and appraiser requirements found in Section 1.170A-17 of the Treasury Regulations, including the requirement that a qualified appraisal be prepared in accordance with the substance and principles of the Uniform Standards of Professional Appraisal Practice.
Obviously, it’s easy to get nitpicky forms like these wrong. All taxpayers should consult with their professional tax adviser before preparing and filing any Form 8283.