Q: How Do You Account For Art As A Nonprofit If The Donor Chooses Not To Deduct It?

A: Even if the donor chooses not to claim a tax deduction for the donated artwork, it's still a good practice for your nonprofit to properly document and record the donation. Here's what you should consider:

1. Acknowledgment: Provide the donor with a written acknowledgment of the donation, including a description of the artwork, but do not include a valuation of the items.

2. Appraisal: While not required for the donor's tax purposes, getting the paintings appraised can help your nonprofit maintain accurate financial records and properly insure the artwork. The appraisal can also be useful if you later decide to sell the paintings.

3. Recording the donation: Record the artwork as an in-kind donation in your nonprofit's financial records. If you have an appraisal, use the appraised value; otherwise, you can record it at a nominal value (e.g., $1) or at the fair market value if it can be reasonably estimated.

4. IRS Form 990: Report the donation on Schedule M of your nonprofit's annual Form 990. If you have an appraisal, use the appraised value; otherwise, use the value recorded in your financial records.

5. Insurance: Consider adding the artwork to your nonprofit's insurance policy to protect against potential damage or loss.

Remember, the responsibility for claiming a tax deduction lies with the donor, not the nonprofit. By following these steps, you'll ensure that your nonprofit's records are accurate and transparent.