All About Fractional Giving and the Tax Code

Loyola Chicago Law student Katrina Gordon recently wrote an excellent piece on fractional giving and the pension protection act. Where is My Monet? Museums and Donors Lose an Important Incentive for Fractional Giving is a 46 page online pdf file. Although I have not posted on any current news from Congress on the PPA and and fractional gifts (I dont think there is any current news on potential changes), I did report several months ago on the AW Blog that there is the possibility the law might be changed (click HERE to read the AW Blog post).

While changes in the law are being considered, Ms. Gordon's article is of interest to all personal property appraisers who could be writing reports for fractional gifts.

The paper covers Fractional Giving prior to the PPA, Artwork Valuation, Recapture Provision, Property Ownership, and Estate and Tax Consequences.

A small excerpt from Ms. Gordon's analysis, (please excuse the way the roman numeral footnotes numbers pasted) The major changes to fractional donation rules seriously hinder tax incentives and will inevitably cause a decline in this method of charitable giving.clxxxviii Museums and art advocates were quick to react to the PPA, decrying the new rules; “[t]his is the death of fractional gifts,” stated Ralph E. Lerner, a lawyer who specializes in art law.clxxxix This Part will demonstrate that failing to adopt suggestions from the various proposals and amend parts of the PPA will have a devastating effect on fractional donations.cxc Next, this Part will examine how Congress has attempted to curb tax advantages to fractional giving in the past and compare those actions and consequences to the current situation under the PPA.cxci Finally, this Part posits that although the PPA is currently unsuitable for fractional giving, at the very least, the PPA ensures that the public benefits from donations.cxcii

Overall a very good academic paper which won honorable mention in the Paul Faherty Tax Writing Competition. It is a paper I recommend all appraiser have a review who may be now, or in the future be writing appraisaals for fractional gifts. To read the paper, click HERE.