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.

The Latest News

The Latest News

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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