Equipment Appraisal Blog | Understanding Machinery Appraisals

How does a donation appraisal work and how can it benefit your finances?

Posted by Equipment Appraisal Services on Tue, Mar 27, 2018 @ 12:27 PM

When you're trying to help out a community organization or charity, a donation of equipment can be a great way to help fill their coffers or provide them with equipment that moves their mission forward. However, when it comes time to deal with finances and taxes, sometimes you need to have a bit more paperwork available than a receipt from the organization in question to document value. During those times, a donation appraisal is often the best way to verify value and provide documentation for tax agencies to back up that value. Here's a quick overview of how the donation valuation process works and in what situations it's most necessary.

How does a donation appraisal work and how can it benefit your finances?

With the changes that have happened recently in the tax code and new tax reform bill, many businesses are concerned about how their donations to charities will work out financially in the future. Fortunately, many of the issues surrounding donations are still somewhat similar to past years. However, if you're considering trying the new tactic of bunching your donation of a large value of equipment into a single year and then coasting through the next several years before your next donation, you'll need to make sure you're able to solidly document the value of your equipment.

But what about tax agencies? If the equipment you're donating is $5,000 or more in value, the IRS requires that you have an appropriate appraisal performed to document the value. What's considered an appropriate or qualified appraisal? Most tax agencies, not just the IRS, will happily accept an equipment appraisal that is performed by a certified appraiser. Why? Because this type of appraisal uses a set of standardized methodologies that have already been tested in a wide range of situations. This means that they've been perfected into methodologies that are accepted by tax agencies, financial institutions, legal circles and insurance companies.

What if you have already donated the equipment during this past year in anticipation of the new tax laws? If you didn't have the opportunity to have the machinery appraised at the time, it's not too late to have an appraisal performed. The methodologies that were mentioned earlier include developing calculations that work well for past values. These values have been used in a wide range of other situations, including insurance losses due to natural disasters, changing market conditions and similar situations. This allows a certified equipment appraiser to look back through time to the situation and conditions under which the donations took place as well as any mitigating circumstances such as cost of removing the equipment from your facility and who bore the burden of that expense.

If the machinery you're donating has a value anywhere near where the cutoffs for the tax agencies you're dealing with, a donation appraisal is a vital part of the process. Fortunately, when you're working with a certified equipment appraiser, you can even have the equipment you've already donated appraised as of the date of its donation, making it easier to deal with tax agency issues that you may have missed at the time of the donation. Working with a certified appraiser ensures that the methodology used in calculating value will be accepted by tax agencies and courts of law if necessary.

Tags: donation appraisal, equipment donations, IRS 8283 form

Reasons for Retrospective Appraisals

Posted by Equipment Appraisal Services on Tue, Feb 23, 2016 @ 10:00 AM

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Oops! When you've made a donation, are involved in litigation or have had an insurance loss, there's nothing quite as concerning as realizing that you needed to have equipment appraisals performed after the fact. How do you fix this problem? In this article, we'll discuss retrospective appraisals and how they can help you get the documentation you need to fix these troublesome problems. Here's how:

Documenting Donations

One of the most common areas where retrospective appraisals are used is in donations to non-profit or not-for-profit organizations that were not properly documented at the time. Especially when you're looking at taking a tax break for the donation, you need to have documentation to take the deduction. If the documentation was not prepared at the time of the donation by an equipment appraiser, it can be really difficult to otherwise prove the value of the equipment you donated. But at the end of your business year, your accountant informs you that they need you to provide supporting documentation for your donation. If you're stuck in this bind, you can still save the deduction by having a retrospective equipment valuation performed by a qualified machinery appraiser.

Proving Litigation

Another area where retrospective valuation can come into play is in litigation. One example of this is when going through a divorce where you need to buy out your spouse's interest in the business or prove that you're not hiding assets. Your spouse  may claim that you're undervaluing equipment that you've sold to keep things solvent while the transition is underway, because they want to get everything they can out of the buy out. A retrospective equipment valuation helps prove that your equipment was worth a particular amount prior to being sold, documenting that you were not hiding or undervaluing business assets.

Insurance Loss

When you've suffered a loss that sets your business back, it's upsetting when you realize you don't have documentation of your equipment values. Whether you're dealing with the fallout of a storm, a fire or a theft, documenting the value of your equipment is a vital part of the claim process. If you didn't have a machinery valuation performed ahead of time, you may be having a difficult time proving what the equipment was actually worth, especially when the equipment was customized or has unusual features that your insurance adjustor isn't familiar with. A retrospective machine appraisal helps prove the exact value of the machinery when the loss took place.

Tax Issues

What about when you're dealing with a tax agency? Equipment can lose value quickly at times, especially if it is in a struggling industry or when technology quickly changes. When a tax appraiser doesn't have a solid grip on the value of the machinery you own and just uses accounting depreciation, it's difficult to prove your side of the appeal without documentation. A retrospective valuation helps prove that the machinery was worth looking at market conditions, the condition of the equipment and similar elements that affect your machinery's final value.

If you find yourself needing to do the time warp to prove equipment values, a retrospective equipment appraisal can help document past value. At Equipment Appraisal Services, our job is helping you document equipment values, even after the fact. Please contact us today for help with your retrospective machine appraisal.

Tags: Litigation, Insurance Loss, donation appraisal, retrospective appraisals

Why an Accredited Equipment Appraiser is Required for a Donation

Posted by Equipment Appraisal Services on Tue, Sep 08, 2015 @ 09:30 AM

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You don't have to go to church every Sunday or be particularly religious to believe in the biblical saying that "to those whom much is given, much is expected." No matter how much or how little you can afford to give, making a donation to a worthy cause always makes you feel good. Many people donate cash and many others choose to make a donation of property.

While giving is its own reward, the IRS also rewards those who make charitable contributions to qualified organizations. As long as you meet certain guidelines and follow some basic rules, you probably will be able to take a deduction on your tax return for the fair market value of your donation. 

Claiming a Deduction for Donated Equipment or Machinery

Individuals, partnerships, and corporations are all eligible to claim a tax deduction on their tax return for donated equipment or machinery. When you donate equipment, machinery, or any other tangible asset, and the listed fair market value is in excess of $500, you are required to fill out IRS Form 8283 (Non Cash Charitable Deductions). On donations above $500, but no more than $5,000, you need to fill out Section A of Form 8283 and you usually don't need to provide an equipment appraisal. On donations above $5,000, you must fill out Section B of Form 8283 and you usually do need to provide an appraisal.

Why Does the IRS Require Equipment Appraisals?

The agency that is responsible for collecting taxes does not necessarily think that everyone will overstate the value of their donation so they can claim a bigger deduction, but they are not stupid. People do cheat.  Have you ever donated a bag of slightly worn clothes to Goodwill worth maybe $50 and claimed a deduction for $450 (remember no appraisal is needed if the donation is under $500)? 

The IRS generally does not question donations under $500, but you should keep records/receipts of all charitable gifts just in case they do. An equipment and machinery appraisal is required on more highly-valued items because the potential "cheating" can seriously reduce the amount of revenue the agency receives. 

In most cases where you need an appraisal, you don't need to attach it to Form 8283 and submit it with your return. An exception would be if your claimed donation is over $500,000. Keep the donation appraisal in your records just in case the IRS questions the amount of the claimed deduction.

Who is a Qualified Appraiser?

Equipment value established by an accredited equipment appraiser is more likely to be accepted as accurate by the IRS.  In general, a qualified or accredited equipment appraiser has the experience, education, and ability to perform an equipment or machinery valuation by following generally accepted appraisal standards.  Accredited equipment appraisers are so designated by the American Society of Appraisers and are compliant with the Uniform Standards of Professional Appraisal Practice.

You would not want to rely on a real estate appraiser if you needed to have your art collection appraised. You would hire an accredited art appraiser. Similarly, if you are interested in a machinery and equipment appraisal to establish fair market value for your donation, you would hire an appraiser specifically trained to appraise the type of property being donated. 

How do you find a Competent Equipment Appraiser?

Don't try to save a few dollars by hiring the cheapest appraiser you can find. You should always look for an accredited equipment appraiser who has the credentials to do an accurate assessment of equipment values. Using an appraisal company that only hires accredited appraisers is probably the best way to assure that you will get a competent equipment appraiser and an accurate appraisal for the equipment you want to donate. 

Tags: equipment appraiser, donation appraisal