Form 8283 Goodwill: How to Value and Report a Donation

When a business donates an intangible asset like goodwill, the process requires documentation to substantiate the claimed deduction. The IRS requires Form 8283, Noncash Charitable Contributions, for reporting these donations. Because goodwill is an intangible asset with a value that is not easily determined, its worth must be formally established through a structured valuation process. This process is designed by the IRS to prevent overvaluation and ensure the integrity of the deduction claimed on a tax return.

Appraisal and Valuation Requirements for Goodwill

Any noncash charitable contribution valued at more than $5,000 requires the donor to obtain a qualified appraisal. The appraisal must be a formal, written report prepared by a qualified appraiser. The IRS requires that this individual has earned an appraisal designation from a recognized professional organization or has met minimum education and experience requirements in valuing business goodwill.

The qualified appraisal report must be completed no earlier than 60 days before the contribution and no later than the due date of the tax return on which the deduction is claimed. The report must include:

• A detailed description of the donated goodwill
• The date of the contribution and its fair market value on that date
• The method used to determine the fair market value
• The specific basis for the valuation, like the assumptions and financial data used

The appraisal document must also include a statement that it was prepared for income tax purposes. The appraiser must include their identifying information, qualifications, and a declaration that they are independent of both the donor and the donee organization. This report provides the information for Form 8283 and must be available if requested.

Completing Form 8283 Section B

With a completed qualified appraisal, the donor can fill out Form 8283. Because a goodwill donation’s value is over $5,000, the donor must complete Section B, which requires information directly from the appraisal report.

In Part I of Section B, the donor provides information about the donated property, describing it as “Goodwill of [Business Name].” The donor enters the appraised fair market value, which must be the exact amount from the appraiser’s report. The donor also needs to report their cost or adjusted basis in the goodwill, which for self-created goodwill is often zero, and the date it was acquired.

The subsequent parts of Section B involve other parties. Part III, “Declaration of Appraiser,” must be signed by the qualified appraiser. Part IV, “Donee Acknowledgment,” must be completed by the recipient charitable organization. The donee’s signature acknowledges receipt of the property but does not represent an agreement with the claimed fair market value.

Filing and Post-Filing Considerations

Once Form 8283 is fully completed and signed, it must be attached to the donor’s federal income tax return for the year the contribution was made. For an individual donor, this would be Form 1040, while a corporate donor would attach it to their Form 1120. Failure to attach the form to the relevant tax return will result in the disallowance of the deduction.

If the charity sells, exchanges, or otherwise disposes of the donated goodwill within three years of the contribution date, it has a reporting obligation to the IRS. The charity must file Form 8282, Donee Information Return, within 125 days of the disposition. This form reports the date of the sale and the amount the charity received for the asset.

The IRS receives a copy of Form 8282 and uses it to cross-reference the original deduction claimed by the donor on Form 8283. A copy of Form 8282 is also sent to the original donor. If the sale price is significantly lower than the appraised value the donor claimed, it could trigger an IRS examination of the tax return on which the deduction was taken.