While such a process is still acceptable for some kinds of transactions, it can no longer be used to value noncash, tax-deductible contributions when the value claimed is over $5,000. If the piano being donated is not in at least good used condition, this threshold drops to only $500. This has actually been the case for some time, but the IRS is getting stricter about enforcing its rules, and some piano technicians and donors are finding their "appraisals" rejected by the IRS — and also by insurance companies, which are increasingly adopting the IRS standards.

As part of the Pension Protection Act of 2006, Congress tightened the valuation and reporting rules for noncash charitable contributions. Exactly what the IRS considers a Qualified Appraisal for tax purposes, and whom it considers to be a Qualified Appraiser, are spelled out in detail in IRS Publication 561, Determining the Value of Donated Property.

According to Publication 561, a Qualified Appraisal must be done according to generally accepted appraisal standards, and no earlier than 60 days before the donation is made. In most cases, the appraisal fee must be a flat or hourly fee, not one based on a percentage of the appraised value. The appraisal must be of the item's Fair Market Value, which the IRS defines as "the price at which property would change hands between a willing buyer and a willing seller, when neither is forced to buy or sell, and when both have reasonable knowledge of all relevant facts." This value, generally based on comparable sales, could also be the piano's salvage value when the instrument needs complete rebuilding, and could include aspects of intangible value when the piano has significant historical value or was owned or used by a celebrity.

The IRS-Qualified Appraisal report must include, among other information:

• A description of the piano (including photos) in enough detail that a person not generally familiar with pianos could determine that the appraised property and the donated property were one and the same.
• The date, or expected date, of contribution, as well as the appraisal date.
• The fair market value on the date of contribution.
• The method of valuation used (e.g., comparable sales), and the specific basis of the valuation, such as specific comparable sales transactions.
• The qualifications of the appraiser, including the appraiser's background, experience, education, and membership in any professional appraiser organizations.

Appraisers must also complete IRS Form 8283, to be filed with the donor's tax return, certifying that the appraiser is competent and qualified to do the appraisal, and aware of the penalties for overstating the value of the donated item. An appraiser who knows that an appraisal will be used with a tax return can be fined by the IRS if he or she substantially overvalues an item and the appraisal results in a substantial underpayment of tax. The donee organization must also provide the donor with a dated letter acknowledging acceptance of the gift, and must sign Form 8283.

An IRS-Qualified Appraiser must either have earned an appraisal designation from a recognized appraiser organization; or must have met certain minimum education and experience requirements, including college- or professional-level coursework relevant to the property being valued, and at least two years of experience in the trade or business of buying, selling, or valuing the type of property being valued. He or she must also regularly prepare appraisals for which he or she is paid. The appraiser must be a disinterested third party, and therefore cannot be the donor, the donee, the person claiming the tax deduction, a party to the transaction in which the donor acquired the property being appraised (in most cases), or anyone employed by or related to any of these people.

Piano technicians and piano dealers usually have greater technical knowledge about pianos than do professional appraisers, and may also know more about piano sales, but they rarely meet the legal qualifications to be IRS-Qualified Appraisers. For that reason, it may be advantageous for technicians and dealers to form partnerships with professional appraisers, in which the technician or dealer examines the piano on-site and writes an inspection report, then the appraiser performs the valuation research and writes the appraisal report according to established appraisal standards. A professional appraisal cannot be done via the Internet without an on-site inspection of the piano.

An IRS-Qualified Appraisal is also required for the valuation of items of personal property for tax purposes related to the settlement of estates and the dissolution of marriages. However, a person buying or selling a piano is not legally required to have an IRS-Qualified or other professional appraisal. Many piano-technician and piano-dealer appraisers may wish to continue writing less formal appraisal documents in these situations. That said, there are some instances in which a buyer or seller might be well advised to hire a professional appraiser, such as when a piano has special historic or artistic value, or when the ownership or signature of a celebrity has added intangible value to the instrument. These are areas in which professional appraisers have had special training, and piano technicians and dealers usually have not. Another instance is when buyer and seller are related to one another or are friends, and wish to be especially certain that the value is accurately set without bias to either side.

This article is intended to be only a brief overview of the subject, not personal tax advice. Please see IRS Publication 561 for more details, and your tax advisor for advice on your personal situation.