What to Do With a Mustang, and Other Lessons in Handling Gifts of Property

For many people, a cherry-red 1968 Ford Mustang convertible would be a dream car. But for Timothy M. Winkler Sr., it was anything but.

In the early 1990s, Mr. Winkler worked in the development office at a small, private university. A donor wanted to give his restored Mustang to the institution. An appraiser, hired by the donor, valued the car at $27,000. The expectation was that the university would sell it and keep the proceeds. Meanwhile, the donor would claim a $27,000 charitable deduction on his taxes. Win-win.

But it didn’t work out that way. When the university moved to sell the car, it was valued at only $8,000. And that created an awkward situation.

If the university had sold the car at that lower price, Mr. Winkler said, the donor would have had to make a $19,000 adjustment in his deduction. Because the college didn’t want to put the owner in that position, it ended up storing the vehicle for three years, at which point the car’s sale would not influence the donor’s taxes. The price of storing an automobile for that long? About $6,000, according to Mr. Winkler, who is now chief executive of the Winkler Group, a fund-raising consulting firm.

In-kind donations, or gifts of property, like the Mustang, can be a boon to institutions, which can either reuse or sell the items. But they often offer more trouble than value. A Chronicle analysis of nearly 900 Internal Revenue Service Form 990s found that close to one-third of those institutions — 282 — received gifts of tangible personal property in the 2015 fiscal year.

Occasionally those gifts come in the form of fine art. In 2006, Henry Ford Community College, in Dearborn, Mich., was offered an art collection worth several hundred thousand dollars, according to A. Reginald Best, vice president for development at what’s now called Henry Ford College. The donation was made before Mr. Best joined the college, but he’s been responsible for it for the last three years.

The institution did not have a plan for what to do with the collection, which has yet to be sold. Furthermore, a 2007 appraisal found the works to be worth $417,000 less than the art gallery that donated them had claimed. Generally, any gift valued at more than $5,000 must be independently appraised if the donor wants to claim it as a tax deduction.

“The college did not do that,” Mr. Best admitted. “We learned a lesson. If the donor says it’s over $5,000, we want an independent appraisal.”

Set Firm Guidelines

In addition to uncertain values, noncash gifts can come with unexpected costs, including storage, installation, cleaning, and insurance. That’s why Mr. Best says having a plan for handling such gifts is critical to avoid turning generous donations into onerous burdens.

A plan sets firm guidelines about what can and can’t be accepted. For many colleges, gift plans require coordination between the college and the foundation soliciting gifts so that both must pre-approve all in-kind donations.

Mr. Best recommends getting board directors for the college and the foundation to decide what kinds of gifts are acceptable. And if a gift doesn’t fit the college’s mission, be prepared to say no.

“I don’t want to keep anything and just store it because there’s no value in storing it,” said Mr. Best. “Whatever we get, we want to immediately put it to use.”

Aligning gifts to mission is also emphasized by Rich Gross, who runs a consulting practice that specializes in community-college fund raising. The value to the recipient is not necessarily the same as to the donor.

“The donor is going to have to work to value that gift between them and the IRS,” Mr. Gross said. “However, you, as the recipient of that gift, have to put a value on that based upon what value it has for your college or your instructional program.”

Mr. Gross, who formerly served as president of Western Dakota Technical Institute, in South Dakota, added, “The two may not always be the same.”

Indeed, Mr. Gross often dealt with “gifts” that held little value for his college. During his tenure at Western Dakota Tech, “donors” would leave junk cars near the college’s automotive school. But they had no value to the school. Mr. Gross often had to call up the vehicles’ former owners and ask them to take the cars to a junkyard.

Aligning Gifts with Needs

That said, the right tangible gift could fill a valuable need. Greg Johnson, director of gift planning at the University of Pennsylvania, said that his institution accepts relatively few in-kind gifts, but once in a while, donors and needs align perfectly. That happened several years ago, when the rowing team needed a new truck. It just so happened a donor had a used truck that was perfect.

The donor, an alumnus, offered his used vehicle after speaking with one of the crew coaches, who often needed to haul boats and athletes back and forth between the campus and the nearby Schuylkill River. After an inspection by a representative of the university’s motor pool made sure the vehicle was in good running order, the gift was approved and put to use.

That truck was an exception, however, not the rule, when it comes to gifts of property. The Ivy League university has strict rules for valuable gifts of art, furniture, and similar objects. For example, donors are asked to pay the costs of transportation and upkeep, Mr. Johnson said.

“It sounds funny at first,” he noted. Asking for cash in addition to an in-kind gift leaves some donors befuddled. But the policy is intended to make sure a tangible gift doesn’t end up becoming a liability.

“Twenty years from now, it may need to be cleaned; we have to pay for the curator position, we have to maintain the collection,” Mr. Johnson said of a recent donation of artwork. “We don’t want our tuition dollars going to pay to curate our collection.”

The maintenance costs are one reason the gift-planning office hesitates to accept an in-kind gift if it can’t be immediately put to use. “We don’t just take things to sell them, we’re not running a flea market.”

Risks aside, Mr. Winkler, the fund-raising consultant, said that most donors have a college’s interests in mind when it comes to in-kind gifts. “They can be great for the donor, and they can be fantastic for the university,” he said.

The key, he added, is having the proper guidance in place before a donor proposes a gift of property. “Having done their due diligence long before that transaction ever takes place,” said Mr. Winkler, “that’s the most important part.”

Peter Olsen-Phillips is a data reporter at The Chronicle. Follow him on Twitter @POlsenPhillips, or email him at peter.olsen-phillips@chronicle.com.