TaxTips

Continuously looking for ideas to save your tax dollars


Keeping our Client's abreast of new tax laws and providing them with possible ideas on ways to reduce their tax burden is one of our goals.   We offer this through this continual update of new tax laws and providing some TAX TIPS which may offer savings ideas.  We present these ideas; however, please consider all facts in your case, and talk with your tax representative,  before implementing any of these these ideas.

       Charitable Donation of Vehicles

The IRS has long felt that donate property to charities are taking advantage of certain loopholes in the tax laws.  Under the law, the deduction amount generally equals the fair market value of the property donated, such as a car.  Under AJCA, the rules are tightened up for contributions made after 2004.  The charitable contribution deduction are limited for donations of motor vehicles, boats and planes for which the value exceeds $500, based on the charity's use of the property, and requires more detailed documentation.

If the charity sells the donated property, without having used the property or materially improving it, the deduction is limited to the charity's gross proceeds from the sale of the property.  This means that the charity must provide to the donor, and the IRS, a contemporaneous written acknowledgment certifying that the property was sold and identify the amount of the sales proceeds.

If the charity retains the property, then the donation can be based on fair market value.  However, the charity must certify the intended use of the property and the intended duration of the use.

The charity's use must be significant, which means the charity must actually use the property to substantially further the charity's regular activities.  Also the use must be more than incidental, based on frequency and duration of use.

 

 Copyright   1987 - 2010 A. Harold Davis, CPA