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Vehicle Donation of $5k+


Alex

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Client donated a vehicle valued at $4k and also contributed to its repair (service/improvement valued at $1k+). I have all that stated in a letter from the non-profit she donated it to.

However, I do not have a 1098-C from the non-profit. The charity didn't sell or give the vehicle away (they will be using it). I don't think the charity furnished a 1098-C to the IRS.

 

In Pub 526, it says "you must get Form 1098-C (or other statement)" within 30 days of your donation. Will the letter provided by the charity suffice as "other statement"?

 

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4 hours ago, Pacun said:

In the future, if your client donates a car worth it $4K, and then pays the mechanic $1k+, please don't pay the mechanic but rather make the check to the non profit and have the non profit pay the mechanic.

One could argue that you have received a benefit by structuring the transaction this way so that there is no additional deduction to be claimed.

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Nothing wrong with donating a car and cash at the same time.  The church will give you two different receipts and they are not related to each other. Once you give money to the church, it is unconditional and you no longer have control over that money, if they church decides to give it to the pastor or fix the car is beyond your control.

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On ‎9‎/‎15‎/‎2018 at 1:30 PM, cbslee said:

One could argue that you have received a benefit by structuring the transaction this way so that there is no additional deduction to be claimed.

I have to agree with this. To receive a tax deduction for a charitable donation, you cannot stipulate what the donated amount is to be used for. Pacun your suggestion, in my opinion, does exactly that. I am confused with your reasoning. The donor gets the full 5K with the proper paperwork without separating any amounts. Separating the two donations into two different categories, really does not have any additional impact but could cause the allowable deduction to be the 4K.

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20 hours ago, Terry D said:

I have to agree with this. To receive a tax deduction for a charitable donation, you cannot stipulate what the donated amount is to be used for. Pacun your suggestion, in my opinion, does exactly that. I am confused with your reasoning. The donor gets the full 5K with the proper paperwork without separating any amounts. Separating the two donations into two different categories, really does not have any additional impact but could cause the allowable deduction to be the 4K.

So,  If a Donor says this $5,000 can only be used to buy food for the hungry... The donor doesn't get a deduction? 

I do not think that is how it works.  There are ALL sorts of donor restrictions placed on contributions.  I have had major donors ask for their money back when the organization decided NOT to pursue what the  donation was for... We want to do project X, we need $100k to do it, but we only raise $35k, so they do not pursue the project, so they have to return the money.

Donor restrictions do not preclude a donation deduction.  "Some" donor restrictions CAN limit deductibility.  That is not the case here. 

The client donated a car to a charity that needed some repair work. They paid for the repair work.  I like Pacun's suggestion to have written a check to the NPOrg for the amount of the repairs.  The NPOrg, if using the vehicle for its charitable purposes, (whatever they are), then a 1098-C is not required to be issued. The 1098-C is issued by the NPOrg when they receive a vehicle and then sell it and use the proceeds to fund what they are doing.  So, the client could have donated a delivery Van to a NPOrg that delivers food to the hungry.

Rich

  

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On 9/14/2018 at 1:35 PM, Alex said:

Client donated a vehicle valued at $4k and also contributed to its repair (service/improvement valued at $1k+). I have all that stated in a letter from the non-profit she donated it to.

Who had title to the car when it was taken to repair shop and who's name was on repair invoice?

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>>>>>>>please don't pay the mechanic but rather make the check to the non profit and have the non profit pay the mechanic.<<<<<<<<<<<<< 

This statement sets the condition of the contribution.

This from Pub 526

Conditional gift.

If your contribution depends on a future act or event to become effective, you can't take a deduction unless there is only a negligible chance the act or event won't take place.


The original post stated the charity did not sell the car as they planned on using it. The OP also questioned the need for the 1098C or would the statement received at the time of donation be suffice. Also from pub 526

 

Exception 1—Vehicle used or improved by organization.

If the qualified organization makes a significant intervening use of or material improvement to the vehicle before transferring it, you generally can deduct the vehicle's fair market value at the time of the contribution. But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. The Form 1098-C (or other statement) will show whether this exception applies.


I would advise the client they can only deduct the FMV of the vehicle. Normally, needed maintenance or other repairs don't increase the FMV value. These repairs may increase the price at which the vehicle is sold. FMV is always the trade in value or lowest value given. I would tell the client to donate the value of the repair cost in a separate donation without any stated condition.  If total of the FMV of the vehicle plus repairs exceeds the FMV, you can only deduct FMV. 

 

 

>>>>>>>>So,  If a Donor says this $5,000 can only be used to buy food for the hungry... The donor doesn't get a deduction? <<<<<<<

Maybe I wasn't clear but that is not what I was stating. Yes, the donation you mention is deductible. This would be the same a stipulating a donation to a specific cause or mission, fund or other charitable need. 

 

 

 

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