June 9, 2005 | Read Time: 1 minute
The Internal Revenue Service has proposed new guidelines on what information charities should expect donors to provide when making gifts of patents and other intellectual property.
The guidelines were issued under the American Jobs Creation Act of 2004, which sharply reduces the size of the tax deductions that companies and other donors may claim when they donate intellectual property to charities.
The law says that when donors make gifts, they must deduct either the amount they spent to create the items or the items’ fair market value, whichever is smaller. Donors may claim additional deductions if charities earn income from the gifts in later years. (Previously, donors could deduct the fair market value of gifts, including the gifts’ potential to bring in future income, whether or not charities ever realized the income.)
Copies of the new guidelines, Notice 2005-41, are available on the IRS Web site, http://www.irs.gov/pub/irs-drop/n-05-41.pdf.
