Car Donation

[Taxadvisor VA]

Individual buys a raffle for a chance to win a new car. Non profit has purchased the car for $22,000 and makes it available for the raffle. The winner decides to donate the car back to the non-profit.

???? Doesn't the non-profit still issue a 1099 (Prizes and awards are taxable) to this individual? For him to be able to donate the vehicle, he will need a letter of donation from the non-profit.

What's your read?

Thanks,

Taxadvisor VA

[appelman]

I would think so.

Unless the charity treats it as a wash and doesn't issue the 1099, he would have to go through the whole rigamarole of donating a car. Not clear to me how the donation would be valued by the charity.

[Taxadvisor VA]

Car Donation

Unless the charity treats it as a wash and doesn't issue the 1099, he would have to go through the whole rigamarole of donating a car. Not clear to me how the donation would be valued by the charity.

Thanks for taking the time to reply. The car was purchased new by the non-profit and I'm sure they have a receipt detailing the cost. They did tell me this morning it was $22,000.

I do like your thought about it being a wash b/c the non-profit had contacted someone else who said just issue a donation letter and they can claim it on their taxes, which didn't "feel right" if you know what I mean. Clearly, the individual is trying to help the non-profit by giving it right back but I don't think he/she should be able to bypass the income part to receive the contribution part. From my seat, one has to follow the other.

Your idea says no income no deduction. I hadn't thought of that position but it sure cuts down on the paperwork and I am presuming that these people itemize. Just suppose they don't.... It increases their taxable income with no offset......

Thanks,

Taxadvisor VA

[Roberts]

IMO, your client refused to accept the winnings - not a taxable gain.

[Taxadvisor VA]

Car Donation

IMO, your client refused to accept the winnings - not a taxable gain.

What about the donation? Is their one?

Thanks for the reply.

Taxadvisor VA

[mactoolsix]

See situaton #3 on this IRS letter:

http://www.irs.gov/pub/irs-wd/04-0003.pdf

It appears the defining moment is if he actually took possession of the car and then donated it back, or did he simply refuse it immediately?

Mike

[Roberts]

What about the donation? Is their one?

Thanks for the reply.

Taxadvisor VA

If they didn't accept the winnings, they can't donate it back to the charity. That IMO is the easiest way to handle it. Seems to me it would be a W-2G, not a 1099 and hopefully they wouldn't issue one. If they did issue one, I'd ask for a corrected W-2G. Did they raffle the car off again? They can't really issue 2 W-2Gs for the same car IMO unless they adjusted the cost of the vehicle the second time as a USED car (exceptionally doubtful).

[appelman]

No income, no donation

If he declines to accept it, it's not his to give. That's the best way, if it can be arranged. Otherwise, he's likely to lose ground, because of the effect of the income on AGI.

[Taxadvisor VA]

Car donation

http://www.irs.gov/pub/irs-wd/04-0003.pdf

It appears the defining moment is if he actually took possession of the car and then donated it back, or did he simply refuse it immediately?

Mike

Mike:

Thank you for the attachment and advice.

Best Regards,

Taxadvisor VA