Gifting business car to charity

[Kram BergGold]

In the Winter TaxPro Journal, in a Q and A section, it says a minister who used his car partially for business (claiming the standard mileage rate) does not need to reduce the value of the car due to business use when he donates the car to charity. To me this is wrong. There is a depreciation componant to the mileage rate, which reduces basis thus creating potential ordinary income on a sale. You can't use FMV when gain would be ordinary if sold. You have to use the adjusted basis. Am I wrong?

[Snaggletooth]

No Depreciation Recapture

It is my understanding that if the standard mileage rate is used, the depreciation component may be used to calculate loss (or add to new basis if traded in), but cannot be used to result in a gain. This might be thrown out the window if vehicle is converted to personal use...

[Davc]

It is my understanding that if the standard mileage rate is used, the depreciation component may be used to calculate loss (or add to new basis if traded in), but cannot be used to result in a gain.

Disagree. The depreciation component may not reduce basis below zero but it is used to calculate a gain.

[Davc]

In the Winter TaxPro Journal, in a Q and A section, it says a minister who used his car partially for business (claiming the standard mileage rate) does not need to reduce the value of the car due to business use when he donates the car to charity. To me this is wrong. There is a depreciation componant to the mileage rate, which reduces basis thus creating potential ordinary income on a sale. You can't use FMV when gain would be ordinary if sold. You have to use the adjusted basis. Am I wrong?

Actually the minister would be donating both a business asset and a personal asset. The current FMV should be allocated based on the overall % of business use. The depreciation component would reduce only the business asset portion's basis but not below zero. Tax tools has good worksheets for a sale and the same principles apply to a contribution of the property.

[taxea]

I don't agree with donating cars to charity since they changed the rules. It just isn't worth it anymore. I suggest to my clients that they sell it outright...get more money for it and then if they want to give the money to charity they are giving more money and get a bigger tax deduction.