The Federal Government encourages
donations of property to public, nonprofit 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 property contributions including Publication
#526 - Charitable Contributions and #561 - Determining the
Value of Donated Property.
I have these forms as well as the form 8283 for donating boats,
yachts and ships. If you donate your boat to a qualified organization,
you may generally deduct the fair market value at the time
of the contribution. The value of your boat is determined
by an appraisal from an expert in a field related to your
property. The IRS, in their publication #561, suggests using
a marine surveyor who is accredited & certified.
Once you have decided to donate the vessel, you must decide
which method is the quickest and most financially rewarding,
an outright sale or a donation. In looking at a sale, you
must take into consideration all of the expenses entailed;
dockage, insurance, maintenance, storage, repairs, interest
and sale commission are just a few. After you have signed
a sale contract and the purchaser surveys the boat, you probably
will be met with more expenses. There are always unforeseen
repair items that need to be corrected after a potential buyer's
marine survey. In most cases, the buyer expects the owner
to adjust the sale price downward or have the owner pay for
these repairs. Another problem in trying to sell your boat
is the time factor. The time of the year in most areas of
the country has a great deal to do with the availability of
ready buyers. The cold winter months seem to drive prices
down and buyers indoors.
By donating your boat, yacht or ship, you avoid these costly
expenses. There are no sale commissions to pay and the entire
transaction is complete by me in a few days. You do not have
to wait six months or a year to find out that your net return
is far less than you expected.
If you or your CPA/Tax Advisor needs any questions answered
on donating your boat, yacht or ship, I can be reached at
my office below.
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You undoubtedly have heard in the media that as of January
1, 2005 the tax laws have changed regarding the charitable
donation of vehicles, boats and airplanes. Although the
changes in the tax laws were aimed at the excesses occurring
with the charitable donation of vehicles, boats are equally
affected as they fall within the same sections of the
tax code.
Because I have had numerous inquiries regarding the impact
the new law will have on yacht and boat donations, I would
like to take this opportunity to explain the changes.
Ultimately, I anticipate minimal impact on the tax deductibility
of boats being donated to reputable 501- C3 foundations.
The new law states that the deduction value of a donated
boat is limited to the gross proceeds of a sale by the
charity on the open market. There are however exceptions
to the gross proceeds rule which will allow you to deduct
the boat's fair market on the date it was donated. They
are as follows:
- An acknowledgement
by the receiving charity that it will make a significant
intervening use of the boat, a detailed statement
by the charity of its intended use, the duration of
that use and a certification that the boat will not
be sold for a period of at least three years.
- An acknowledgement
by the receiving charity that it intends to make material
improvements to the boat increasing it's value, a
detailed description of the intended material improvements
and a certification that the boat will not be sold
before completion of the improvements.
- An acknowledgement
by the charity that it intends to give or sell the
boat to a needy individual(s) or to a charitable institution
at a price significantly below fair market value.
This provision applies only if the gift is in furtherance
of the charity's purpose
- A special rule
applies for boats with a value under $500.00. In this
case a donor may claim a deduction for the lesser
of the boats fair market value or $500.00
Most charities will
provide the acknowledgment required by submitting to the
donor and to the IRS form 1098-C. If the charities acknowledge
on this form one of the four exceptions noted above than
the donor is entitled to take the full appraised value
of the boat as a charitable deduction on their Federal
and possibly State tax returns in the year in which it
was donated. Any boats having a fair market value in excess
of $5,000.00 must have a written appraisal by an Accredited
& Certified Marine Surveyor.
Currently, the donor of a vessel with an appraised value
in excess of $5000 submits an 8283 and 1098C tax form
to the IRS showing the appraised value verified by an
Accredited & Certified Marine Surveyor and the intended
use by the charity. I have these forms which the charity
receiving the vessel, must sign and certify that it will
not sell the vessel within three years. The exception
to this three year rule is if the donor accepts the immediate
sale price realized by the charity as his tax deduction
for the donation. After three years there is no reporting
requirement as the donated asset is considered depreciated
to a point where the appraised value is no longer meaningful.
If for some reason the IRS should take the gigantic step
of completely changing their existing procedures and tax
forms for charitable donations of boats, I would be notified
immediately. Donating your boat, yacht or commercial vessel
is still a very viable financial alternative to an actual
sale with many tax advantages.
Please call me if you have any questions about the new
tax law and how it might relate to donating your boat
or yacht. To date I have appraised 1,475 yachts and ships
nation wide.
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