you can only write off what you paid above fair market value. I doubt they buyer could claim fair market value of this car is MSRP, but who knows...see below from IRS

Contributions From Which You Benefit

If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive. Also see Contributions From Which You Benefit under Contributions You Cannot Deduct, later.
If you pay more than fair market value to a qualified organization for merchandise, goods, or services, the amount you pay that is more than the value of the item can be a charitable contribution. For the excess amount to qualify, you must pay it with the intent to make a charitable contribution.
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Wow that is ridiculous. Who was the moron at the IRS that wrote that in or the lawmaker. No ownder we have a deficit. Oh yea and that lil thing we call Iraq isnt helping either.

 

I don't understand why car dealers can charge ADM's when stores like best buy can't on high demand items like the ps3.

 

I can only assume that you have a problem with not paying taxes on moneys donated to charity in general or you simply don't understand the statement in question. All this states is that, if an item is bought with the intent that the procedes from that sale will be donated to a charitable organization, you are allowed to write off the amount over fair market value paid for that item.

In other words they let you write off the portion of the transaction that actually is a donation which makes this virtually no different than simply allowing anyone making a generic monetary donation to write off their contribution. (and in reality the tax man likely would prefer that you buy something rather than simply donating money since 'fair market value' gives him a lot of room to stick it to you) The only thing that changing this is likely to accomplish is a drop in charitable donations.

 

What is "fair market value" for a car that was never meant for retail?

 

What is sells for would be my guess, where is an IRS agent when you need one?

 

How about this scenario of a car being sold at auction:

Car with a MSRP of $50k is given by Ford to be auctioned for charity. Ford gets to write off $50k.

Highest bid is $225k, second highest bid $150k.

IMO, buyer gets to write off $75k, because the fair market value is $150k, which is the fair amount someone else was willing to pay for the vehicle. i.e., if buyer were to immediately turn around and sell the car, he could theoretically get $150k.

So far $125k is written off. So who gets to write off the missing $100k? Ford?

 

First, Whoever donates the car, gets the cost of the car, labor and parts deducted, nothing more. The buyer will get the price paid for the car deducted if he can prove the value is less then paid, so if the value is really 50K and he pays 600K he can write off 550K if the value is 600K , he can write off nothing.

when you buy stuff at auction for charity, the IRS deducts the value of the item. because you get that item and it's value.

Heres another example. We sold a hertz hood at a local auction, it went for 6000.00. The value was 500. because that's what we sell it for. the owners writes off 5500.00 as the charitable donation. That is how it was explained to me, by a tax lawyer. Im assuming this is correct


Amy

 

Thanks, Amy !