Charitable Contribution of Auto

[Gene V]

I was reading IRS Notice 2005-44 Charitable Contributions of Certain Motor Vehicles, Boats, and Airplanes.

Here is a summary of what I got out of it and a question.

Example 1: If you give a vehicle with a FMV of $1,600 and the vehicle is sold by the organization for $1,300, then the organization will issue a statement to the donor within 30 days of the date of sales with the sale price of $1,300. This is what you can deduct.

Example 2: Same fact as Example 1, except the organization keeps the vehicle for there own used or sell the vehicle at a price significantly below FMV to needy individual. Then you can deduct the FMV of $1,600; all this information will be given to you by the organization within 30 days after the date of the contribution.

Section 4. DEDUCTION OF $500 OR LESS

Example 3: If you give a vehicle with a FMV of $800 and the vehicle is sold by the organization (without any significant intervening use or material improvement) for $400, your deduction is the lesser of FMV or $500, in this case it would be $500.

In Example 1 and 2, a copy of the acknowledgement must be included with your tax return. So if you Electronically file, you couldn’t use the paperless Form 8879, but would have to use Form 8453 and send in the sign form with the attachment. Does this sound correct?

Section 5. FAIR MARKET VALUE

The Service and the Treasury Department intend to issue regulations under Sec. 170 that will clarify the dealer retail value listed in a used vehicle pricing guide is not an acceptable measure of fair market value—FMV to use is the private party pricing in the used vehicle pricing guide.

Anyway, there are 6 pages to read on this subject.

One more posting for member status-I'm not in a hurry to become a member (I can't afford the dues).

[Bird Legs]

Donation of car to charitable organiz.

Are you sure the organization will issue a certificate upon the sale of a donated car?
Technically, yes, they are supposed to, effective 01/01/05.
Have a client that donated a car to a charitable organization in March, 2005. Organiz.
issued a receipt acknowledging that it did receive the vehicle.
Asked client what the charity did with vehicle. Keep it & use it? Sell it? Client did not know. I called the organization. Asked the person that answered the phone what happened to car? Response was I do not know, I will have to have the person that
takes care of that call you back. It has now been 2 months since I made that call and
have not heard back.
Will call them again later when I get over being lazy.
tweet...

[Gene V]

proper acknowledgement

Good question Bird Legs, they do have a section in the notice about Penalties for false or fraudulent acknowledgments and for knowing failure to furnish proper acknowledgement.

Section 7, of the notice, talks about the requirements of the organizations.
Web link for the notice: http://www.irs.gov/irb/2005-25_IRB/ar09.html

[BOB W]

Donations

I'm not sure if it has changed but, in the past, as long as you received a "letter of intent" that the charity was going to use the donation within their everyday function it wouldn't matter if they sold it at some later date, no matter how soon after the donation date.

Not too many years ago my client was audited on a $600,000 yatch donation. I had the Organization complete a "Letter of Intent" (BEFORE the yatch was signed over to them) and it saved the full deduction when the organization ultimately sold it for $375,000 three months later. The reason they sold it was because one of the deisel engines blew. Which for the most part was not at issue, because one of the exception to the sale of donated property was; at the time of donation the intent of the organization was to use it for its exempt function.

Again, I don't know if the new enforcement efforts by the IRS has changed any of the old laws.

[jainen]

Fmv

The problem was that taxpayers could claim a car was worth $4500 even though the seller could only find a buyer for $500. The new regs bring back the reasonable concept that FMV is determined by actual market conditions. In the case of the boat, first there must have been a bona fide appraisal, second that the lower price reflected the damage incurred.

[Snaggletooth]

Close the loop

Best advice to clients: don't leave the charity without closing the loop with them. Get SOMETHING from them, and monitor their potential sale if that is the deal.

Many well-meaning charities have leadership personnel that are serving without pay, and who are tending to the affairs of the charity because there are too few people willing to contribute their time. Many of them are chosen simply because they are willing to spend the time and effort - not because they are administratively savvy. This is true even of local chapters of large charities to some extent. A charity headquartered out of some other state may be effectively aligned with bankers, lawyers, and people who file 990s, but the local branch may be a classic case of "the unwilling appoint the unable to do the unnecessary" when dealing with administrative issues.

[BOB W]

Boat

Jainen> The damage to the boat was not $225,000 so that is not why the IRS backed off during the audit. As a matter of fact, the issue was never brought up. The facts were clear, the Organization fully intended to use the yacht in its exempt function and then changed its mind later. The letter of intent was sufficent to allow my client to use the $600,000 deduction regardless of what the organization did with the yacht.