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Donations of
Personal Property
The federal government encourages donations of property
to public, non-profit charities. The
same tax deductions are permitted for
donations of property as for cash donations. This is not a
tax loophole but a
definite recognition on the part of Congress of the importance of such a gift to
a qualified, IRS approved organization.
The Internal Revenue Service distributes several
publications to guide the public and their tax
advisors in determining the best
way to handle their property contributions,
Publication #526:
Charitable Contributions, and
Publication #561: Determining the Value of Donated
Property.
Please note: you will need a copy of
Adobe Acrobat Reader to view the files.
Generally you may deduct an amount up to 50% of your
adjusted gross income and if your
contribution exceeds 50% of your gross income,
you may deduct the excess in the 5 succeeding
years until it is used.
If you
donate your property to a qualified organization, you may generally deduct the
fair market
value
at the time of the contribution. The value of
your property is determined by an appraisal from
an expert in the field related
to your property. The IRS, in their Publication #561,
suggests using
marine surveyors and published market guides to help determine
the fair market value of boats.
For automobiles and aircraft, experts in
those fields should be consulted.
Once you have decided to dispose of your property, you must decide which method
is the quickest
and most financially rewarding, an outright sale or a donation.
There are a number of ways to
increase your financial return on a donation, one
of which is a Bargain Sale. A Bargain Sale is
a sale of property to a
charity at less than its fair market value, with a result that is in part a sale
of the property and in part a charitable contribution.
For Example:
If you sell your property with a fair market value of $50,000 to a charity
for $10,000, and are allowed a deduction for all or part of the $40,000
gift,
you have made a Bargain Sale. |
In looking at a sale, you must take into
consideration all of the expenses you must expect. Storage,
dockage,
insurance, repairs, investment interest and brokerage sale commission are a few
of the
expenses to be expected before you sell your property. After you
have signed a sales contract and
the buyer surveys the property, you probably
will be met with more expenses. There are always
repair items that need to
be corrected after a purchaser's survey, and in most cases the seller ends
up
paying for them. You must also realize that the length of time a property
is on the market before
selling is generally over 6 months. With a
donation, all expenses cease the property is donated.
The main factors in a property donation are that you can tell
now exactly what the net return on
your property is and your expenses end now.
You don't have to wait six months or more and then find
that your return
is far less than you expected.
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