Charitable Donations in the Equine Sector By T. Randolph Catanese, Esq., for the American Horse Council’s September 2021 Tax Bulletin Te American Horse Council produces a


quarterly Tax Bulletin to keep members up to date with important tax court cases and regula- tions. Te most recent bulletin relates to horses or other property being given as a charitable contribution. We thought this would be a helpful adjunct to our Government Relations column on non-profits.


Deduction for Donating a Horse to Charity


If a horse or other property is given as a


charitable contribution, the donor may gener- ally deduct the fair market value of the prop- erty. However, when property given to a charity would result in ordinary income to the donor if the property had been sold instead, the amount of the gift must be reduced by the amount of the ordinary income that would have been reported by the donor had the property been sold instead of donated. Also, if a horse that is eligible for capital gain treatment has been de- preciated and is then donated to the charity, the amount of the gift is the value of the horse re- duced by the amount of depreciation recapture. Te deduction amount must also be reduced if gifted tangible personal property does not in some way relate to the purposes that give rise to the charity’s tax exemption. Te equine gift may not be in exchange for a financial or other economic type of benefit. In addition, a written appraisal performed by a qualified appraiser is generally required for each horse (or other property) donated when the claimed charitable contribution deduction is in excess of $5,000.


Deduction by an Individual An individual may claim an itemized deduc-


tion for contributions to a qualified charitable organization (Schedule A-Form 1040). Te charitable deduction in any tax year is limited to a percentage of the taxpayer’s contribution base determined by the type of organization receiving the donation and the type of prop- erty donated. Any excess in the tax year may


be carried forward for 5 years. If married indi- viduals file a joint return, the percentage limi- tation depends on the aggregate contribution base of both spouses. A limit also applies to the amount of the charitable deduction allowed for gifts of appreciated property and is imposed before applying the percentage limitation. Generally, the percentage levels for an indi- vidual are:


• 60% of the taxpayer’s contribution base for contributions of cash for tax years 2018 through 2025 to public charities • 30% of the taxpayer’s contribution base for contributions of capital gain property to public charities


• 50% of the taxpayer’s contribution base for contributions of cash before 2018 and ordinary income property to tax exempt organizations • For contributions of ordinary income prop- erty to qualified charitable organizations other than public charities, the lesser of 30% of the taxpayer’s contribution base or the excess of 50% of the taxpayer’s contribution base for the tax year over the amount of charitable contri- butions qualifying for the 50% deduction ceil- ing, including carryovers • 20% of the taxpayer’s contribution base for contributions of capital gain property to quali- fied charitable organizations that are not public charities


For tax years beginning in 2020 only, an eligible individual may claim an above-the-line deduc- tion in computing adjusted gross income of up to $300 for any qualified charitable contribution in response to the COVID-19 crises. (CARES Act IRC Section 62(a)(22), and (f)(1).) Te 60% limitation on the deduction of


charitable contributions of cash by individuals is suspended for qualified charitable contribu- tions made in 2020 in response to COVID-19. An individual may deduct any qualified cash contribution as long as the contribution does not exceed the individual’s contribution base (100%) and any excess may be carried forward


for 5 years. (CARES Act Section 2205(a).). Tere are limitations depending on the organi- zation’s status as a charity. If the taxpayer is a partner in a partnership or a shareholder in an S corporation, the elec- tion to claim the deduction with respect to the qualified contribution is made by the partner or shareholder.


Deduction by a Corporation A corporation’s deduction for charitable


contributions is limited to 10% of its taxable income for the year (25% for qualified contri- butions in 2020) calculated without regard for items like deductions for dividends, deduction for a bond premium, and any net operating loss or capital loss carryback to the tax year. Corporate donors that qualify as farmers or


ranchers may deduct certain qualified conserva- tion contributions of real property interests up to the excess of the donor’s taxable income over all other allowable charitable contributions. Charitable contributions that exceed the 10% limit may be carried over the corporation’s 5 suc- ceeding tax years. But deductions in those years are also subject to the maximum limitation (IRC Section 170(d)(2)). And, except for the carryover rule, a deduction is allowed only for the chari- table contribution paid during the tax year.


Conclusion A corporation’s deduction for charitable


contributions is limited to 10% of its taxable income for the year (25% for qualified contri- butions in 2020) calculated without regard for items like deductions for dividends, deduction for a bond premium, and any net operating loss or capital loss carryback to the tax year. Corporate donors that qualify as farmers or


ranchers may deduct certain qualified conserva- tion contributions of real property interests up to the excess of the donor’s taxable income over all other allowable charitable contributions.


Te American Horse Council’s Tax Bulletin is sponsored by Zoetis and has been reprinted here with permission from AHC. For more information, visit: www.horsecouncil.org.


www.equiery.com | 800-244-9580 THE EQUIERY YOUR MARYLAND HORSE COUNCIL PUBLICATION | NOVEMBER 2021 | 21


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