I irrevocably donate to a charitable organization the income stream from a piece of intellectual property (a book royalty contract) that has been generating a fairly steady $10K per year for the past 15 years, and has every reasonable expectation of continuing to do so for the next ten years -- in fact, given the nature of the IP that's generating the income, it will most likely continue generating gradually decreasing income for five to ten years longer than that.A fair appraisal of the value of my donation is the net present value of the $10K/year cash flows for the next 10 years, using some reasonable discount rate.Right???

Without my expressing an opinion, as a minimum you will needto have a qualified appraiser's signed valuation opinion aspart of a Form 8283 attached to the tax return.

Appraising a donated income stream?

Nov 20, 2010 28 Replies

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Pico Rico 15 years ago

A bit of research seems to indicate what the OP was suggesting will not be deductible.

"Sec. 170(f)(3) generally denies a charitable deduction for contributions of less than the donor's entire property interest. However, a deduction would be allowed under Sec. 170(f)(3)(B)(ii) for a contribution of a partial interest if it consists of the donor's entire interest in the property (unless the property in which such partial interest exists was divided to create such interest). Also, a deduction would be allowed if the taxpayer contributes an undivided portion of its entire property interest. "

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Bill Brown 15 years ago

Cite?

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Stuart A. Bronstein 15 years ago

There are other things that generate income, and you can give those away, such as treasury bonds, real property that receives rent, etc. And all of those not only do you get the income out of your taxable income, but you get a deduction for the underlying asset.

The difference, I think, is that when you only give away the income stream and not the underlying asset, the income stream has no basis.

But more important, the general rule is that you are not allowed to assign bare income. If you retain ownership of an asset that generates income, the income will be taxed to you no matter who receives the income. That's not in the statute, but is enunciated in Supreme Court decisions.

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AES 15 years ago

My query was based on the premise that I would donate to the charity anything and everything of any sort connected with the property and its associated income stream --"ganz alles" so to speak.

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removeps-groups 15 years ago

So if you pay nothing to create 100 sonnets the cost basis is zero. But if you sell the rights to a company or person for $50,000, then to that person the cost basis is $50,000.

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Stuart A. Bronstein 15 years ago

If you donate the underlying intellectual property, you may be able to get a deduction for that. But you can't simply assign income by itself and have it taxed to someone else.

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Bill Brown 15 years ago

Exactly.

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Bill Brown 15 years ago

As has been stated a few times in this thread, if you donate the copyrighted item to a qualifed charity your deduction is the LESSER of fair market value or your basis. If you created the copyrighted item yourself, your basis is probably quite low - the cost of several sheets of paper and the regisration fee charged by the copyright office. Note that your basis is NOT increased by any expenditure that you have already deducted on one of your tax returns.

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removeps-groups 15 years ago

What about electricity for the use of your computer, depreciation of computer used in your writing business, trips you made to research the event, meals eaten while away from home, fees you paid to get the research, online backup services to save your precious work, etc.

Evidently freelance authors are exempt from the uniform capitalization rules.

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rule means that if you produce things then you can't deduct theabove expenses as expenses but must rather include them in the costprice of the items you produce. But freelance authors can deductthese expenses as immediate expenses, and if they did this then thecost basis will be exactly zero.

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