More on Taxidermy Donations

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ISSUE:

A recent Tax Court ruling says “not so fast” to the valuation of donated hunting specimens.

SITUATION:

Denali Christian College (SCC) is a private college exempt under Internal Revenue Code section 501(c)(3) and section 170(b)(1)(A)(ii).  They received a donation of 40 taxidermy “specimens” along with an appraisal for these items in the amount of $325,000.

DCC’s CFO calls us to ask us what he should know about recording these items and how to report them on Form 990.

We tell him that taxidermy donations are generally reported at Schedule M (Form 990), Line 21.  Also, there has been a recent Tax Court decision (TC Memo 2017-165) where the IRS challenged an appraisal that utilized the replacement cost method and the Tax Court agreed.  The original appraisal valued 199 “big-game hunting specimens” at $1.4 million dollars, the IRS and Tax Court readjusted this amount to $163,000 using the comparable sales method.

RULES:

From Schedule M (Form 990) instructions:

Line 21. Taxidermy property means any work of art that is the reproduction or preservation of an animal, in whole or in part; is prepared, stuffed, or mounted to recreate one or more characteristics of the animal; and contains a part of the body of the dead animal.

From Tax Court Memo 2017-165:

Headnote

IRS’s comparable sales valuation of owner and CEO of several family-owned propane gas distribution cos./avid big-game hunter’s hunting specimens contributed to ecological foundation, which had since been dispersed to unknown locations, was upheld: IRS’s expert/certified appraiser specializing in taxidermy items showed that specimens were neither world-class trophies nor museum-quality research specimens but rather remnants, leftovers and scraps of taxpayer’s trophy collection, and that market for such was now “wide open” due to proliferation of traditional and internet auction sites. In contrast, taxpayer’s experts’ use of replacement cost approach, based on appraisal attached to taxpayer’s return for year for which donation was made, was flawed when considering above and facts that taxpayer’s own testimony indicated that he wished to “downsize” his collection by deaccessioning unwanted items; that photos included in appraisal contradicted appraiser’s assertion of specimens’ “excellent” condition; and that appraisal failed to provide any detailed provenance information about items. Also, even if replacement costs were considered and tax payer showed that IRS’s comparable sales figures required upward adjustment, one of taxpayer’s experts made no allowance for taxpayer’s personal enjoyment of his safaris.

BOTTOM LINE:

  • Does your organization really want/need a contribution of several “hunting specimens?”
  • Taxidermy donations are reported at Schedule M (Form 990), Line 21
  • Taxidermy is defined in the Schedule M instructions a “work of art” that – among other things – “contains a part of the body of the dead animal.”
  • Be diligent in ensuring that any amounts recorded for “taxidermy” are valued based upon a reason method.

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.