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Be sure to tell your donors about the potential tax benefits they can receive through making in-kind gifts, as you very well may have donors who are best equipped to provide in-kind support. (That said, it's also important to suggest that they speak to a professional tax planner or attorney to see what's best for their situation.)
Not surprisingly, the IRS has guidelines for gifts of this type. The key issue to keep in mind in your initial conversation with a donor of TPP is to determine if the property being gifted is a related use item for your organization.
For example: If your 501(c)(3) organization exists to educate the public on being green, a donor who wants to give your organization a Picasso painting may find their charitable deduction is significantly compromised, as the painting doesn't have a use related to your organization's reason for being.
For a by-the-book definition of TPP, let's take a look at IRS pub. 526. It says:
"The term TPP means any property, other than land or buildings, that can be seen or touched. It includes furniture, books, jewelry, paintings and cars."
In fact, even though not specifically identified in this document by the IRS, the list of things that fall under TPP has grown, guided by the premise that they "can be seen or touched." (Please see the Assets That Fund page for a list of the assets that typically make a good in-kind gift.)
In short, then: Yes, TPP can be gifted, and yes it can be valued for the purpose of the donor taking a charitable deduction.
But TPP isn't the only type of property that can be given in kind. Another classification of in-kind gifts is Intangible Personal Property (ITPP).
Unfortunately, the IRS code doesn't provide a definition of ITPP, but it does provide several examples:
- Copyrighted literary, musical, or other artistic compositions
- Patent, invention, formula, process, design, pattern or know-how
- Trademark, trade name or brand name
- Franchise, license or contract
- Method, program, system, procedure, campaign, survey, study, forecast, estimate, customer list or technical data
- Any similar item which has substantial value independent of the services of any individual.
In the world of gift planning, the most common types of ITPP seem to be:
- Life insurance
- Annuity contracts
- Partnership interests, and
- Mineral rights
The pages in this section take a closer look at the specifics and functions of in-kind gifts and how they can be successfully taken advantage of, according to the following topics:
- Who, Why, When. In-kind gifts aren’t always offered at the time your organization can make use of them. That's why a clear understanding by both parties to the gift is essential to establish before accepting the gift.
- How It Works. Consult our list of questions to answer before accepting an in-kind gift.
- Assets That Fund It. Many donors may not be aware that by making an in-kind gift they can receive a charitable tax deduction. As such, it's useful to have a list of the asset types that can be given in-kind and make the donor eligible for a tax deduction.
- Tax Issues. Transfers of tangible personal property present specific and special issues for income tax charitable deduction purposes.
- How to Accept. Your organization should have established guidelines for receiving tangible personal property.
- Policies & Procedures.
For a more comprehensive sense of what an in-kind is and how it works, we recommend starting at the top, with Who, Why, When.