There often comes a time when your trusted equine partner can no longer perform at his previous level, but he still has a lot to give. For many of us, the costs of supporting a horse in his retirement are just not in the budget. In these situations, donating or giving your horse away are the best options to ensure he gets the care he deserves.
gift horse (plural gift horses)
1. (idiomatic) An apparent gift, that has substantial associated costs.
Is there a difference between a gift and a donation?
From a legal standpoint, the definition of a gift is a voluntary transfer of property from one person to another without consideration. So, whether you give your horse to a friend or donate your horse to a charity, legally, it’s a gift. But there is a difference between gift and donation when it comes to the IRS.
With a gift, the giver (not the receiver) is responsible for reporting on their taxes if the value exceeds a certain threshold. Currently that threshold is $14,000 per year for individuals. On the other hand, a donation is cash or property transferred to a charitable organization. A donation is tax deductible if the donor meets certain requirements.
To take a tax deduction for the charitable donation of your horse, you will need to:
- Make sure you are donating the horse to a non-profit charity qualified under IRS 501(c)(3). This is a designation given to organizations which derive their income from charitable, religious, educational, scientific purposes, with none of its earnings going to a private shareholder or individual. If you question whether a particular charity qualifies for this designation, you can use the IRS lookup tool on its website.
- Determine your horse’s fair market value (FMV). The FMV is the price a willing, knowledgeable buyer would pay a willing, knowledgeable seller when neither has to buy or sell.
- If the FMV is over $5000, you will have to have to provide an appraisal by a qualified appraiser.
- If the FMV is less than $5000 you will have to provide certain details and descriptions of the property. All of this must be provided by completing IRS form 8283.
Whether it's a gift or a donation, get it in writing
Most charitable organizations that routinely accept donations will provide you with a written horse donation agreement. This is a document which outlines the agreement between the donor and the organization. It can include terms for a trial period or what happens in the event the horse is not kept by the organization. Read this agreement carefully before signing and always make a copy of any contracts you enter into.
If you are gifting on your own, I highly recommend you document the gift with a gift declaration or gift affidavit. This document sets out in writing the intent of the giver, the acceptance by the donee and the receipt of the gift property.
An alternative which many horse owners have used for years is to “sell” the horse for a nominal amount (for instance a dollar), and draft a Bill of Sale to evidence the sale. For any contract to be valid there must be an offer, consideration (something of value promised in exchange for a specified action or inaction), acceptance, and mutuality (a meeting of the minds). When a horse owner “sells” her horse for $1.00, the dollar serves as consideration. In general, courts will not question the sufficiency of consideration. As long as the seller and the buyer understood and agreed to the basic terms of the agreement, the contract will be valid. Keep in mind that under the Uniform Commercial Code, any sale $500 must be evidenced in writing. No matter what the sale price, I highly recommend a bill of sale. Moreover, certain states have specific requirements for an equine bill of sale. (See A Primer on the Equine Bill of Sale...Beyond the Handshake.)