Purpose

Below, we provide technical guidance on determining and reporting the cost or adjusted basis of donated deconstructed building materials and furniture as required by the Internal Revenue Service (IRS) on Form 8283, Noncash Charitable Contributions. The objective is to clarify taxpayer and appraiser responsibilities and outline acceptable methods of calculating and documenting cost basis for compliance under Internal Revenue Code Section 170 and related Treasury Regulations.

Overview

For non-cash charitable contributions exceeding $5,000, the IRS requires completion of Form 8283 Section B by the taxpayer and certification by a qualified appraiser. Box F of this section specifically requires the donor to provide the original cost or adjusted basis of the donated property. This entry allows the IRS to evaluate whether the claimed charitable deduction is reasonable in comparison to the donor’s original investment.

IRS Requirements

The IRS expects the cost basis reported on Form 8283 Section B Box F to be derived using reasonable, supportable, and well-documented methods. According to IRS Publication 561 and Treasury Regulations §1.170A-13, the basis should reflect either the actual acquisition cost or a reasonable allocation of cost based on credible supporting evidence. The appraiser is responsible for developing the fair market value (FMV) of the contributed property; however, the taxpayer must determine and report the cost or adjusted basis, acquisition date, and method of computation.

Regulatory Authority

Internal Revenue Code §170(e)(1) and Treasury Regulation §1.170A-1(c)(1) define the basis of contributed property as its original cost, adjusted for depreciation, improvements, or other capital changes. IRS Publication 561 reinforces that the appraiser’s role is limited to determining FMV, while the taxpayer supplies basis and acquisition information on Form 8283.

Individuals may claim a tax deduction for non-monetary charitable contributions on their Form 1040 Schedule A “Itemized Deductions.” To take charitable contributions of either a monetary or non-monetary nature, an individual must itemize deductions. With the passage of the Tax Cut and Jobs Act (TCJA), the Standard Deduction has been substantially increased ($24,000—Married, $18,000—Head of Household and $12,000—Single.) This means that an individual’s itemized deductions must exceed the Standard Deduction.

Permitted Methodologies for Determining Cost Basis

1. Original Purchase Records

   Donors with invoices, purchase orders, or receipts may cite the actual acquisition cost of the donated property as the cost basis.

2. Allocated Basis from Real Estate Transactions

   When the donated personal property (e.g., appliances, fixtures, built-ins) was acquired as part of a real-estate purchase, the donor may allocate a portion of the purchase price based on:

   • Local tax assessment ratios distinguishing land and improvements
   • Internal cost breakdowns of improvement value by component (roof, cabinetry, HVAC, etc.)

3. Standard Construction Cost Allocation

   In the absence of detailed records, industry-standard cost allocation tables or construction percentage guides may be applied to determine the portion of the total building basis attributable to the donated components. This method is frequently used in deconstruction and salvage projects.

4. Proportional FMV Allocation

   The donor may allocate cost basis proportionally by comparing the FMV of the donated property to the total FMV of the improved real property and applying that same percentage to the original acquisition cost.

5. Adjusted Basis (Depreciated)

   When the property was used in a trade or business, the cost basis must reflect any depreciation previously claimed. The adjusted basis equals the original cost less accumulated depreciation plus any capital improvements.

Accepted Allocation Frameworks for Deconstructed Materials

In deconstruction contexts, reasonable allocation methods include:

1. Proportional Cost Allocation: Assigning percentages of the overall building basis to specific systems (structure, finishes, doors, windows, cabinetry). The per centage associated with the salvaged components equals the reported cost basis.
2. Engineering or Cost-Segregation Analysis:Utilizing detailed cost studies or engineering estimates to assign original costs by system, allowing precise attribution to the removed and donated materials.
3. Invoice or Direct Purchase Basis:For furniture, fixtures, or separately acquired materials, using original invoice cost adjusted for any applicable depreciation.
4. Estimated Reconstruction Method:Where records are unavailable, estimating cost basis using industry construction cost data, replacement cost indices, or other credible cost references, provided the method is well-documented and consistently applied.

Key Notes and Compliance Considerations

• The method used must be reasonable, consistently applied, and supported by documentation such as closing statements, appraisals, engineering estimates, or tax assessments.
• Leaving Box F blank or stating “unknown” without explanation may increase the likelihood of IRS examination.
• Special rules apply to inherited, gifted, or exchanged property.
• The appraiser reports only fair market value; the taxpayer provides basis and acquisition details.
• Donations exceeding $5,000 require a qualified appraisal; those exceeding $500,000 require the full appraisal report to be attached to the return.

Summary

The cost basis reported on Form 8283 Section B Box F represents the donor’s proportionate share of the original cost or adjusted basis attributable to the donated materials or furniture. The IRS permits reasonable allocation methodologies, provided the approach is logical, supportable, and documented.

Conclusion

The taxpayer is responsible for determining and substantiating cost or adjusted basis information required on Form 8283. The appraiser’s role is confined to establishing fair market value in accordance with USPAP and IRS Regulations. When supported by adequate documentation and consistent methodology, cost basis determinations strengthen the credibility of the appraisal and ensure compliance with federal charitable-contribution reporting standards. We are providing an estimated cost basis based upon records received by the client and adhering to the methodology listed above.