There is no "best practice" for tracking and reporting on In-Kind Donations.  The donations end up being added into all general reports and goal tracking and additional reporting and querying has to be done in order to "take out" the in-kind donation amounts.  If the amounts are placed in a UDF, there is no way to add the totals... So there's really just no way to track in-kind donations and it's vital information for reporting for grants as well as sending tax receipts to constituents.