FundSvcs Community

A potential donor wants to give us artwork to be displayed at one of our six schools. While he says it is not a loan, he also says that we are not allowed to sell or dispose of it - and if we no longer want it, we have to return it to him (or, presumably, at least offer first right of refusal). So...it's ours until we decide we don't want it. This doesn't sound like a gift. If that assessment is correct, which IRS provision addresses this? Lisa Christison, MBA Executive Director, Development Operations UTHealth Office of Development 7000 Fannin | Suite 1200 | Houston, Texas 77030 713-500-3204 tel | 713-500-3052 fax lisa.m.christison@uth.tmc.edu

See IRS Publication 526. For a gift to be a gift it must be irrevocably given to a qualified organization. This has not been so given. John John H. Taylor Principal John H. Taylor Consulting, LLC 2604 Sevier St. Durham, NC 27705 johntaylorconsulting@gmail.com 919.816.5903 (cell/text) Serving the Advancement Community Since 1987 On Wed, Aug 28, 2019 at 1:13 PM Lisa Christison < lisa.m.christison@uth.tmc.edu> wrote: > A potential donor wants to give us artwork to be displayed at one of our > six schools. While he says it is not a loan, he also says that we are not > allowed to sell or dispose of it - and if we no longer want it, we have to > return it to him (or, presumably, at least offer first right of refusal). > So...it's ours until we decide we don't want it. This doesn't sound like > a gift. If that assessment is correct, which IRS provision addresses > this? > > > Lisa Christison, MBA > Executive Director, Development Operations > UTHealth Office of Development > 7000 Fannin | Suite 1200 | Houston, Texas 77030 > 713-500-3204 tel | 713-500-3052 fax > lisa.m.christison@uth.tmc.edu >

I agree that his case is pretty clear cut, and the donor should not expect to be able to take a deduction on his taxes, but every case is not quite as cut and dried as John and Aaron make it seem. Donors of art may include strings, even strings that could lead to the collection reverting back to their control, AND claim a deduction in certain cases. Those cases are where the possibility that the art reverts back to the donor is “so remote as to be negligible.” For instance, Jake Johnson gives his Abstract Expressionist collection to Yale, but with the stipulation that if California breaks off and floats into the Pacific, Yale has to give him the paintings back. In this case, Yale counts the gift and Jake takes a tax deduction. That’s an extreme example, of course, but where that line is drawn and arguing about what “so remote as to be negligible” means is why lawyers exist.—Bill ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of Forrest, Aaron Sent: Wednesday, August 28, 2019 1:25 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG Subject: Re: [FUNDSVCS] GIK If you don’t have clear title, it is indeed a loan regardless of what the donor said. If it quacks, it’s a duck. My thoughts. Aaron Aaron Forrest CPA Senior Director Gift and Donor Services University of Rochester Office of Advancement Larry and Cindy Bloch Alumni and Advancement Center 300 East River Road Rochester NY 14627 Office 585.275.2799 / Fax 585-273-4558 Email aaron.forrest@rochester.edu <mailto:aaron.forrest@rochester.edu> <http://www.rochester.edu/> P Please consider the environment before printing this email. Confidentiality Notice: This message, including attachments may contain confidential information. Any unauthorized use, disclosure or distribution is prohibited. From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG <mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG> > On Behalf Of John Taylor Sent: Wednesday, August 28, 2019 1:15 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG <mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG> Subject: Re: [FUNDSVCS] GIK See IRS Publication 526. For a gift to be a gift it must be irrevocably given to a qualified organization. This has not been so given. John John H. Taylor Principal John H. Taylor Consulting, LLC 2604 Sevier St. Durham, NC 27705 johntaylorconsulting@gmail.com <mailto:johntaylorconsulting@gmail.com> 919.816.5903 (cell/text) Serving the Advancement Community Since 1987 On Wed, Aug 28, 2019 at 1:13 PM Lisa Christison <lisa.m.christison@uth.tmc.edu <mailto:lisa.m.christison@uth.tmc.edu> > wrote: A potential donor wants to give us artwork to be displayed at one of our six schools. While he says it is not a loan, he also says that we are not allowed to sell or dispose of it - and if we no longer want it, we have to return it to him (or, presumably, at least offer first right of refusal). So...it's ours until we decide we don't want it. This doesn't sound like a gift. If that assessment is correct, which IRS provision addresses this? Lisa Christison, MBA Executive Director, Development Operations UTHealth Office of Development 7000 Fannin | Suite 1200 | Houston, Texas 77030 713-500-3204 tel | 713-500-3052 fax lisa.m.christison@uth.tmc.edu <mailto:lisa.m.christison@uth.tmc.edu>

To avoid the California floating aware scenario, rather than return the art to the donor I urge language in gift agreements that allow for the transfer to another qualified organization - thus protecting the original deduction. It also does not hurt to remind a donor that if we issue a receipt for such a gift today, and return the item in the future, the donor will receive a 1099 reflecting the appreciated value of the item that is given to them and they will be responsible for all associated taxes. John John H. Taylor Principal John H. Taylor Consulting, LLC 2604 Sevier St. Durham, NC 27705 johntaylorconsulting@gmail.com 919.816.5903 (cell/text) Serving the Advancement Community Since 1987 On Wed, Aug 28, 2019 at 1:35 PM Bill Wong <wswong@scad.edu> wrote: > I agree that his case is pretty clear cut, and the donor should not expect > to be able to take a deduction on his taxes, but every case is not quite as > cut and dried as John and Aaron make it seem. > > Donors of art may include strings, even strings that could lead to the > collection reverting back to their control, AND claim a deduction in > certain cases. Those cases are where the possibility that the art reverts > back to the donor is “so remote as to be negligible.” For instance, Jake > Johnson gives his Abstract Expressionist collection to Yale, but with the > stipulation that if California breaks off and floats into the Pacific, Yale > has to give him the paintings back. In this case, Yale counts the gift and > Jake takes a tax deduction. > > That’s an extreme example, of course, but where that line is drawn and > arguing about what “so remote as to be negligible” means is why lawyers > exist.—Bill > > > > ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ > > > From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> > On Behalf Of Forrest, Aaron > Sent: Wednesday, August 28, 2019 1:25 PM > To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG > Subject: Re: [FUNDSVCS] GIK > > > > > If you don’t have clear title, it is indeed a loan regardless of what the > donor said. If it quacks, it’s a duck. My thoughts. > > > Aaron > > Aaron Forrest CPA > Senior Director Gift and Donor Services > University of Rochester Office of Advancement > Larry and Cindy Bloch Alumni and Advancement Center > 300 East River Road > Rochester NY 14627 > Office 585.275.2799 / Fax 585-273-4558 > Email aaron.forrest@rochester.edu <mailto:aaron.forrest@rochester.edu > <aaron.forrest@rochester.edu>> > > <http://www.rochester.edu/> > P Please consider the environment before printing this email. > Confidentiality Notice: This message, including attachments may contain > confidential information. Any unauthorized use, disclosure or distribution > is prohibited. > > > From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG > <mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG <FUNDSVCS@LISTSERV.FUNDSVCS.ORG>> > > On Behalf Of John Taylor > > Sent: Wednesday, August 28, 2019 1:15 PM > To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG <mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG > <FUNDSVCS@LISTSERV.FUNDSVCS.ORG>> > Subject: Re: [FUNDSVCS] GIK > > See IRS Publication 526. For a gift to be a gift it must be irrevocably > given to a qualified organization. This has not been so given. > > > John > > John H. Taylor > Principal > John H. Taylor Consulting, LLC > 2604 Sevier St. > Durham, NC 27705 > johntaylorconsulting@gmail.com <mailto:johntaylorconsulting@gmail.com > <johntaylorconsulting@gmail.com>> > 919.816.5903 (cell/text) > > Serving the Advancement Community Since 1987 > > > On Wed, Aug 28, 2019 at 1:13 PM Lisa Christison < > lisa.m.christison@uth.tmc.edu <mailto:lisa.m.christison@uth.tmc.edu > <lisa.m.christison@uth.tmc.edu>> > wrote: > > A potential donor wants to give us artwork to be displayed at one > of our six schools. While he says it is not a loan, he also says that we > are not allowed to sell or dispose of it - and if we no longer want it, we > have to return it to him (or, presumably, at least offer first right of > refusal). So...it's ours until we decide we don't want it. This doesn't > sound like a gift. If that assessment is correct, which IRS provision > addresses this? > > > > Lisa Christison, MBA > Executive Director, Development Operations > UTHealth Office of Development > 7000 Fannin | Suite 1200 | Houston, Texas 77030 > 713-500-3204 tel | 713-500-3052 fax > lisa.m.christison@uth.tmc.edu < > mailto:lisa.m.christison@uth.tmc.edu <lisa.m.christison@uth.tmc.edu>> >

I recognized it as a non-gift but wasn't confident about how best to fashion an acceptable gift agreement. This helps. Thanks, John.

I appreciate the input. It is pretty clear cut - I was getting caught up in how to explain to the donor precisely which IRS provision makes this unacceptable but I needn't have concerned myself with that level of detail. Now on to drafting a gift agreement.... Thanks, John, Bill, and Aaron!

If you don’t have clear title, it is indeed a loan regardless of what the donor said. If it quacks, it’s a duck. My thoughts. Aaron Aaron Forrest CPA Senior Director Gift and Donor Services University of Rochester Office of Advancement Larry and Cindy Bloch Alumni and Advancement Center 300 East River Road Rochester NY 14627 Office 585.275.2799 / Fax 585-273-4558 Email aaron.forrest@rochester.edu [Description: Description: Description: cid:image001.gif@01C92E92.3629C5E0] <http://www.rochester.edu/> P Please consider the environment before printing this email. Confidentiality Notice: This message, including attachments may contain confidential information. Any unauthorized use, disclosure or distribution is prohibited. From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of John Taylor Sent: Wednesday, August 28, 2019 1:15 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG Subject: Re: [FUNDSVCS] GIK See IRS Publication 526. For a gift to be a gift it must be irrevocably given to a qualified organization. This has not been so given. John John H. Taylor Principal John H. Taylor Consulting, LLC 2604 Sevier St. Durham, NC 27705 johntaylorconsulting@gmail.com<mailto:johntaylorconsulting@gmail.com> 919.816.5903 (cell/text) Serving the Advancement Community Since 1987 On Wed, Aug 28, 2019 at 1:13 PM Lisa Christison <lisa.m.christison@uth.tmc.edu<mailto:lisa.m.christison@uth.tmc.edu>> wrote: A potential donor wants to give us artwork to be displayed at one of our six schools. While he says it is not a loan, he also says that we are not allowed to sell or dispose of it - and if we no longer want it, we have to return it to him (or, presumably, at least offer first right of refusal). So...it's ours until we decide we don't want it. This doesn't sound like a gift. If that assessment is correct, which IRS provision addresses this? Lisa Christison, MBA Executive Director, Development Operations UTHealth Office of Development 7000 Fannin | Suite 1200 | Houston, Texas 77030 713-500-3204 tel | 713-500-3052 fax lisa.m.christison@uth.tmc.edu<mailto:lisa.m.christison@uth.tmc.edu>

We also clarify in our gift policy in a few places … “All gifts of property must be donated with clear and non-contingent title and full benefit to the University of Rochester.” And later … “All gifts of art become University property with clear, unconditional title. We cannot accept fine art, rare books, or scholarly works on a temporary or loan basis as gifts. Donors cannot place perpetual restrictions on display, use, or disposition of fine art, rare books, or scholarly works. For items not intended for the University’s permanent collections, this includes the University’s potential future desire to liquidate items for operating cash. Additionally, acceptance of the gift-in-kind cannot commit the University to any financial obligation such as maintenance, protection, storage, or special insurance costs. If gift-in-kind is documented in a gift agreement, donors wishes can be preference only; if the University is unable to accommodate the donor’s preference – such as a display preference – in the future, the gift will be used in the way that best supports the mission of the University.” We don’t allow gift agreement language contradictory to this. Note that the permanent collections at our art museum have special rules, procedures, and acquisitions process. We don’t handle that here in Advancement, but I’ve seen those contracts. They are solid and protect the University from any eventuality. Aaron Aaron Forrest CPA Senior Director Gift and Donor Services University of Rochester Office of Advancement Larry and Cindy Bloch Alumni and Advancement Center 300 East River Road Rochester NY 14627 Office 585.275.2799 / Fax 585-273-4558 Email aaron.forrest@rochester.edu [Description: Description: Description: cid:image001.gif@01C92E92.3629C5E0] <http://www.rochester.edu/> P Please consider the environment before printing this email. Confidentiality Notice: This message, including attachments may contain confidential information. Any unauthorized use, disclosure or distribution is prohibited. From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of John Taylor Sent: Wednesday, August 28, 2019 1:39 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG Subject: Re: [FUNDSVCS] GIK To avoid the California floating aware scenario, rather than return the art to the donor I urge language in gift agreements that allow for the transfer to another qualified organization - thus protecting the original deduction. It also does not hurt to remind a donor that if we issue a receipt for such a gift today, and return the item in the future, the donor will receive a 1099 reflecting the appreciated value of the item that is given to them and they will be responsible for all associated taxes. John John H. Taylor Principal John H. Taylor Consulting, LLC 2604 Sevier St. Durham, NC 27705 johntaylorconsulting@gmail.com<mailto:johntaylorconsulting@gmail.com> 919.816.5903 (cell/text) Serving the Advancement Community Since 1987 On Wed, Aug 28, 2019 at 1:35 PM Bill Wong <wswong@scad.edu<mailto:wswong@scad.edu>> wrote: I agree that his case is pretty clear cut, and the donor should not expect to be able to take a deduction on his taxes, but every case is not quite as cut and dried as John and Aaron make it seem. Donors of art may include strings, even strings that could lead to the collection reverting back to their control, AND claim a deduction in certain cases. Those cases are where the possibility that the art reverts back to the donor is “so remote as to be negligible.” For instance, Jake Johnson gives his Abstract Expressionist collection to Yale, but with the stipulation that if California breaks off and floats into the Pacific, Yale has to give him the paintings back. In this case, Yale counts the gift and Jake takes a tax deduction. That’s an extreme example, of course, but where that line is drawn and arguing about what “so remote as to be negligible” means is why lawyers exist.—Bill ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG>> On Behalf Of Forrest, Aaron Sent: Wednesday, August 28, 2019 1:25 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG> Subject: Re: [FUNDSVCS] GIK If you don’t have clear title, it is indeed a loan regardless of what the donor said. If it quacks, it’s a duck. My thoughts. Aaron Aaron Forrest CPA Senior Director Gift and Donor Services University of Rochester Office of Advancement Larry and Cindy Bloch Alumni and Advancement Center 300 East River Road Rochester NY 14627 Office 585.275.2799 / Fax 585-273-4558 Email aaron.forrest@rochester.edu<mailto:aaron.forrest@rochester.edu> <mailto:aaron.forrest@rochester.edu> <http://www.rochester.edu/> P Please consider the environment before printing this email. Confidentiality Notice: This message, including attachments may contain confidential information. Any unauthorized use, disclosure or distribution is prohibited. From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG> <mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG> > On Behalf Of John Taylor Sent: Wednesday, August 28, 2019 1:15 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG> <mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG> Subject: Re: [FUNDSVCS] GIK See IRS Publication 526. For a gift to be a gift it must be irrevocably given to a qualified organization. This has not been so given. John John H. Taylor Principal John H. Taylor Consulting, LLC 2604 Sevier St. Durham, NC 27705 johntaylorconsulting@gmail.com<mailto:johntaylorconsulting@gmail.com> <mailto:johntaylorconsulting@gmail.com> 919.816.5903 (cell/text) Serving the Advancement Community Since 1987 On Wed, Aug 28, 2019 at 1:13 PM Lisa Christison <lisa.m.christison@uth.tmc.edu<mailto:lisa.m.christison@uth.tmc.edu> <mailto:lisa.m.christison@uth.tmc.edu> > wrote: A potential donor wants to give us artwork to be displayed at one of our six schools. While he says it is not a loan, he also says that we are not allowed to sell or dispose of it - and if we no longer want it, we have to return it to him (or, presumably, at least offer first right of refusal). So...it's ours until we decide we don't want it. This doesn't sound like a gift. If that assessment is correct, which IRS provision addresses this? Lisa Christison, MBA Executive Director, Development Operations UTHealth Office of Development 7000 Fannin | Suite 1200 | Houston, Texas 77030 713-500-3204 tel | 713-500-3052 fax lisa.m.christison@uth.tmc.edu<mailto:lisa.m.christison@uth.tmc.edu> <mailto:lisa.m.christison@uth.tmc.edu>