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Discussion Starter · #1 ·
I am selling a LP340. I have a question from a minister who is making a cash offer lower than the fair market value but saying I can deduct the difference as a charitable gift.

I hate to be paranoid but does this sound legit to you guys?

My 2nd question is for the tax experts. We do itemize our deductions but would all of the difference between the offer and fair market price be deductible?

Thanks for any insights.
 

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You might have to apply the federal depreciation guidelines rather than the fair market value in order to claim the difference in price as a charitable deduction. That may or may not work in your favor.
 

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Even if you can deduct the difference between the fair market value and the price paid by the minister, you will only be able to see a fraction of that as a deduction.


You typically benefit from deductions as a function of your rate of taxation. So, if you are paying at the 30% bracket, you will see about 30% of the above difference as a benefit. The rest--the 70% of the difference--is your contribution to his church.


You also need to get proper documentation for this, generally in the form of a letter acknowledging the contribution. Tax-deductable contributions must be made to valid 501c(3) organizations.


IMHO, the real question is whether or not you want to contribute to the church in question.

 

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Lots of nonprofits use tax deductibility as a negotiating tool for contributions, but I've never heard of a minister doing this. I'm assuming he's buying the projector for church-related purposes only. Otherwise it's not legit.


Generally, you can deduct the difference between the fair market value and the ultimate sale price -- but the documentation requirements can be a pain in the $#@!. If the value of all of your charitable "donations" is $500 or more, you'll have to fill out Form 8283. You can get this form and instructions at http://www.irs.gov/forms_pubs/forms.html. If all your charitable contributions total under $500, a receipt from the minister should do. Most tax-exempt organizations have special forms for this purpose.


If you go ahead with the sale, make sure you get detailed documentation that shows the value of the projector (such as completed eBay auctions for the same projector at around the time of your sale), the sale price, the implied charitable contribution, and the minister's tax-exempt information. You won't have to produce this documentation unless the IRS asks for it.


Caveat: Individual income tax is not my specialty - I usually work with skanky corporate tax shelters. But I recently researched charitable contributions to do my own return.


Wading through the tax code is tough -- even for those of us that do it every day. Good luck!
 

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I would not do this deal. The projector is not being sold to a registered charity but to the priest or minister. Do you know for a fact that the person you are dealing with is a minister? To me this seems like a slick way of getting a discount and it may not pass the arms length test that the IRS requires. The cash offer part is really scary. Get a check, make a copy of it, and keep it as proof that the church paid below fair market value. You can just as well sell the projector for fair market value and make this same charity claim and possibly be on the same legal ground, shaky ground that is.


If there is one thing to be wary of, it is creative accounting. The IRS will get you on that every time.


------------------

cai
 

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Discussion Starter · #7 ·
Thank you for the reponses. I did get an email from the Minister that did say I would only be able to deduct my tax bracket x the difference of sale and fair value as you guys stated. I don't want to lose too much so probably will not go this route.

This site is such a great asset. Thank you all again.
 
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