May 13, 2004 | Read Time: 2 minutes
As the Senate Finance Committee continues its investigation into donations of artworks, real estate, and other noncash gifts to charities, it has asked the Smithsonian Institution to account for the $50-million valuation placed on a gift six years ago of four Stradivarius musical instruments to the museum.
In a letter to Smithsonian Secretary Lawrence M. Small, Sen. Charles E. Grassley, head of the Senate Finance Committee, said the panel had serious concerns regarding noncash gifts to charities. “The findings of this review have been troubling, indicating that too many taxpayers are taking highly inflated values for in-kind donations — be it cars, land, intellectual property, or other types of in-kind property.”
Mr. Grassley, Republican of Iowa, asked the Smithsonian to provide “all material in its possession or control regarding this donation,” including a copy of Form 8283, “Noncash Charitable Contributions.”
Donors are required to submit Form 8283 with their income-tax returns if they donate more than $500 worth of goods. Charities that receive gifts valued by a donor at more than $5,000 are required to sign the form as well, acknowledging receipt. The form states that a charity’s acknowledgment “does not represent agreement with the claimed fair market value” of the gift.
The Smithsonian donor, Herbert R. Axelrod, a book publisher, claimed a $50-million deduction for the musical instruments on his income-tax return, according to news accounts. A lawyer for Mr. Axelrod has said appraisals by experts support the valuation Mr. Axelrod claimed for the instruments.
In his letter to the Smithsonian, Mr. Grassley also asked for a copy of Form 8283 for every donation over $10-million that the institution has received since 2001. “Please describe what, if any, steps the Smithsonian takes before it signs a Form 8283 to ensure that the taxpayer’s claimed deduction is accurate,” Mr. Grassley wrote.
Federal law does not require charities to ask donors how they value their gifts for income-tax purposes. To prevent potential problems, many lawyers advise charities to avoid indicating even an estimated gift value on the receipt they are required to provide to donors for gifts worth more than $250. Charities may obtain their own appraisals of donated gifts, which they may or may not provide to the donors.
In his letter, Mr. Grassley suggested that charities should be held accountable for the charitable income-tax deductions claimed by their donors. He said this is not the first time questions about the value of a gift to the Smithsonian have arisen. In 1983, the IRS investigated the value of several gems given to the museum.
