Boat donations quashed by Bush and congress
 

The scores of charitable organizations around the country who rely on the
acquisition and resale of donated yachts have been scuttled by a bill passed by
Congress and signed by President Bush. (Disclosure, I used to work for such an
organization).

Under the old law, a donor could deduct the "appraised value" of an asset
donated to charity. The law required vessels to be valued by an independent
marine surveyor, and additionally required that the surveyor be prepared to
defend the valuation using data commonly accepted within the industry. In many
cases, boats were acquired through a mechanism known as a "bargain sale", in
which
the charitable organization could pay for a portion of the boat in cash and the
donor was allowed to take a tax write-off for the difference.

There was, undoubtedly, some abuse of such a system.

Under the new law, the donor cannot deduct anything until the boat is resold by
the charity, and the donor will then be limited to a deduction equal to the
amount the boat brought when sold by the charity.

This same law will now apply to the "donate your car" programs that have become
so popular. Under those programs, donors are typically allowed to deduct the
retail blue book value of a donated vehicle and the charity then runs the cars
through a wholesale auto auction to get whatever they will bring. One veterans
organization in the NE reportedly raised $5mm from donated cars in the last
year.
Kiss 4.9 million of that good-bye.

No longer able to deduct what the asset might have brought, if sold retail,
most donors will be far more reluctant to take a tax deduction based on
whatever number some organization chooses to sell a car, boat, or other asset
for in order to make payroll or rent at the end of the month.

Funny move from an administration that claims it supports philanthropic giving
as an alternative to government social funding and claims it wants to reduce
taxes. This measure makes philanthropic giving far less attractive, not more,
and increases taxes on those who donate assets to charity.

In article ,
Gould 0738 wrote:


The scores of charitable organizations around the country who rely on the
acquisition and resale of donated yachts have been scuttled by a bill passed by
Congress and signed by President Bush. (Disclosure, I used to work for such an
organization).

Under the old law, a donor could deduct the "appraised value" of an asset
donated to charity. The law required vessels to be valued by an independent
marine surveyor, and additionally required that the surveyor be prepared to
defend the valuation using data commonly accepted within the industry. In many
cases, boats were acquired through a mechanism known as a "bargain sale", in
which
the charitable organization could pay for a portion of the boat in cash and the
donor was allowed to take a tax write-off for the difference.

There was, undoubtedly, some abuse of such a system.

Under the new law, the donor cannot deduct anything until the boat is resold by
the charity, and the donor will then be limited to a deduction equal to the
amount the boat brought when sold by the charity.

This same law will now apply to the "donate your car" programs that have become
so popular. Under those programs, donors are typically allowed to deduct the
retail blue book value of a donated vehicle and the charity then runs the cars
through a wholesale auto auction to get whatever they will bring. One veterans
organization in the NE reportedly raised $5mm from donated cars in the last
year.
Kiss 4.9 million of that good-bye.

No longer able to deduct what the asset might have brought, if sold retail,
most donors will be far more reluctant to take a tax deduction based on
whatever number some organization chooses to sell a car, boat, or other asset
for in order to make payroll or rent at the end of the month.

Funny move from an administration that claims it supports philanthropic giving
as an alternative to government social funding and claims it wants to reduce
taxes. This measure makes philanthropic giving far less attractive, not more,
and increases taxes on those who donate assets to charity.

There has been such RAMPANT abuse of this Chuck that it had to stop
SOMEWHERE.

I know of people who have abused this system. It was legal, but smelled
like dead fish.

I for one am glad that this loophole was closed, because there was simply no
way to fix the old way it was being done.

--
--
Karl Denninger ) Internet Consultant & Kids Rights Activist
http://www.denninger.net My home on the net - links to everything I do!
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On 28 Oct 2004 00:59:15 GMT, (Gould 0738) wrote:

The scores of charitable organizations around the country who rely on the
acquisition and resale of donated yachts have been scuttled by a bill passed by
Congress and signed by President Bush. (Disclosure, I used to work for such an
organization).

Under the old law, a donor could deduct the "appraised value" of an asset
donated to charity. The law required vessels to be valued by an independent
marine surveyor, and additionally required that the surveyor be prepared to
defend the valuation using data commonly accepted within the industry. In many
cases, boats were acquired through a mechanism known as a "bargain sale", in
which
the charitable organization could pay for a portion of the boat in cash and the
donor was allowed to take a tax write-off for the difference.

There was, undoubtedly, some abuse of such a system.

Under the new law, the donor cannot deduct anything until the boat is resold by
the charity, and the donor will then be limited to a deduction equal to the
amount the boat brought when sold by the charity.

This same law will now apply to the "donate your car" programs that have become
so popular. Under those programs, donors are typically allowed to deduct the
retail blue book value of a donated vehicle and the charity then runs the cars
through a wholesale auto auction to get whatever they will bring. One veterans
organization in the NE reportedly raised $5mm from donated cars in the last
year.
Kiss 4.9 million of that good-bye.

No longer able to deduct what the asset might have brought, if sold retail,
most donors will be far more reluctant to take a tax deduction based on
whatever number some organization chooses to sell a car, boat, or other asset
for in order to make payroll or rent at the end of the month.

Funny move from an administration that claims it supports philanthropic giving
as an alternative to government social funding and claims it wants to reduce
taxes. This measure makes philanthropic giving far less attractive, not more,
and increases taxes on those who donate assets to charity.

I really don't have a problem with this - seems fair and reasonable.

What isn't fair and reasonable is the sales tax law in CT. For
example, if I purchase a $500 dollar item as a gift in July and
present that gift in September, if the recipient wishes to exchange
the gift for any reason, they are required to repay the sales tax even
if they have the receipt for the original transaction. In effect, the
$500 dollar gift is taxed twice because the sales tax cannot be
credited after thirty days has passed.

And that's just one of the little interesting tax oddities our
Democrat controlled legislature has perpetrated on the citizens over
the past two years. Another is the gas sales tax. Effectively, you
are paying a tax on a set of taxes. The per gallon sales tax is the
gross amount of the sale which includes the "use" taxes applied to the
cost of the gas before you pump it. And the "use" tax is applied to
the gallon plus the Federal tax.

Neat huh? A tax on a tax on a tax.

When it comes to taxes and such, the Democrats in this state hold a
candle to nobody. :)

Take care.

Tom

"The beatings will stop when morale improves."
E. Teach, 1717

Gould 0738 wrote:
The scores of charitable organizations around the country who rely on the
acquisition and resale of donated yachts have been scuttled by a bill passed by
Congress and signed by President Bush. (Disclosure, I used to work for such an
organization).

So have I... actually I usually say I worked "with" one such
organization since they didn't pay me anything.


Under the old law, a donor could deduct the "appraised value" of an asset
donated to charity. The law required vessels to be valued by an independent
marine surveyor, and additionally required that the surveyor be prepared to
defend the valuation using data commonly accepted within the industry.

And a lot of people skipped this step, or selected absurd valuations.

... In many
cases, boats were acquired through a mechanism known as a "bargain sale", in
which
the charitable organization could pay for a portion of the boat in cash and the
donor was allowed to take a tax write-off for the difference.

Never saw this done.


There was, undoubtedly, some abuse of such a system.

Ya think ;)


Under the new law, the donor cannot deduct anything until the boat is resold by
the charity, and the donor will then be limited to a deduction equal to the
amount the boat brought when sold by the charity.

This same law will now apply to the "donate your car" programs that have become
so popular. Under those programs, donors are typically allowed to deduct the
retail blue book value of a donated vehicle and the charity then runs the cars
through a wholesale auto auction to get whatever they will bring. One veterans
organization in the NE reportedly raised $5mm from donated cars in the last
year.
Kiss 4.9 million of that good-bye.

Y'know what? If you look at charity funding in general under this
"compassionate conservative" administration, donations of all types are
way down. Many small charities have simply folded up, a lot of big ones
are surviving but barely, and on 25% or less of what they pulled in 5
years ago.



Funny move from an administration that claims it supports philanthropic giving
as an alternative to government social funding and claims it wants to reduce
taxes. This measure makes philanthropic giving far less attractive, not more,
and increases taxes on those who donate assets to charity.


Karl Denninger wrote:
There has been such RAMPANT abuse of this Chuck that it had to stop
SOMEWHERE.

Why? I thought part of the Republican ideal was to limit the amount
taken out of people's pockets by gov'mint.


I know of people who have abused this system. It was legal, but smelled
like dead fish.

The abuse might be rather stinky, but there was nothing wrong with the
system itself.


I for one am glad that this loophole was closed, because there was simply no
way to fix the old way it was being done.

?? Maybe to make people rationalize the amount of the deductions
relative to the valuation of the donated boat or car? I think this was
shooting mice with an elephant gun.

And a further observation... a problem neither of you has commented on.
It seems to me that this is only a problem if the market value of a
particular type or class of goods (cars, boats) is dropping, making it
attractive to donate rather than sell on the open market. It's been a
buyer's market for sailboats for a really long time now and it's only
going to get worse. Now you can't even give 'em away!

Personally, I expect the market for SUVs and camper/motor homes to
plummet, too.

Regards
Doug King

Far more honest. A product you have for sale is worth...what it sells
for, eh? Why should I be able to write off a donation of a clapped-out
old Junkercraft for $100,000, when it only fetches $9,000 at sale?

Is it worth what is brings at a distress sale, or what it could reasonably
expect to retail for?

There is certainly abuse in the current system, and I saw some of that when I
was involved in that industry. Your example of an appraisal being 11 times what
an asset is sold for is pretty extreme.

Once you have donated an asset to a charitable organization, you lose control
over how it is marketed. Cash-strapped charities often dump donations to make
payroll, rent, meet program funding commitments, etc.

If you pay $100,000 for a Junkercraft, take good care of it for a few years,
add some upgrades, and then get an indendent survey for $100,000 it's worth a
figure closer to that $100,000 than the $9,000 you suggested in the
hypothetical example.

"Harry Krause" wrote in message
...
Gould 0738 wrote:
The scores of charitable organizations around the country who rely on the
acquisition and resale of donated yachts have been scuttled by a bill
passed by
Congress and signed by President Bush. (Disclosure, I used to work for
such an
organization).

Under the old law, a donor could deduct the "appraised value" of an asset
donated to charity. The law required vessels to be valued by an
independent
marine surveyor, and additionally required that the surveyor be prepared
to
defend the valuation using data commonly accepted within the industry. In
many
cases, boats were acquired through a mechanism known as a "bargain sale",
in
which
the charitable organization could pay for a portion of the boat in cash
and the
donor was allowed to take a tax write-off for the difference.

There was, undoubtedly, some abuse of such a system.

Under the new law, the donor cannot deduct anything until the boat is
resold by
the charity, and the donor will then be limited to a deduction equal to
the
amount the boat brought when sold by the charity.

Far more honest. A product you have for sale is worth...what it sells
for, eh? Why should I be able to write off a donation of a clapped-out
old Junkercraft for $100,000, when it only fetches $9,000 at sale?

Stop the presses! You're backing a Bush-supported Republican initiative,
Harry?

There has been such RAMPANT abuse of this Chuck that it had to stop
SOMEWHERE.



I do agree there was a lot of abuse.
Working within the industry, I got a real eyeful. Sometimes the organization I
worked for would be competing with other charitable groups. I've seen some
deals made (by competitors) that smelled like dead fish *after* it had passed
through an entire digestive tract.

It's true that some of the "donors" were more motivated by greed than by
charitable impulse, and some of the organizations used that motivation to
excellent advantage.

I can remember cases where people were so eager to believe the load of crap
they were fed by certain organizations that competing against those
organizations, based on reality, was pretty tough.

There are a number of organizations that have done a lot of good work with
proceeds from this type of program, many that have done at least some good work
(sounds personally familiar), and a lot that were simply using the tax laws to
buy boats well below a reasonable wholesale market value.

I got out of the business when they cut my pay. My last year in, I secured and
resold over 50 boats, almost all in the 25-50 foot category. Other fund raisers
had done 6, 8, 10, etc. A *lot* of money flowed through that office, some of it
into legitimate programs. Lesson learned, don't be the highest paid guy in the
place unless you're the owner. To this day, I'm still baffled why any company
thinks they can overpay a guy working on a percentage basis. They should have
hoped I would make seven figures a year. :-)

A product is worth what it sells for. If you think your Junkecraft is
worth $100,000, sell it for that and donate the 100 large to the
charity. Then write off your donation.

One of the fund raising appeals is that is cheaper to donate than to sell. All
that moorage, insurance, maintenance, repairs,
brokerage commissions, etc,.......

If you donated your Parker to a local charity, and they sold the boat for
$25,000 to a boat dealer from NYC who put it on a trailer, hauled it to NY, and
resold it for $50,000........what was it worth?

In article ,
Gould 0738 wrote:

Far more honest. A product you have for sale is worth...what it sells
for, eh? Why should I be able to write off a donation of a clapped-out
old Junkercraft for $100,000, when it only fetches $9,000 at sale?

Is it worth what is brings at a distress sale, or what it could reasonably
expect to retail for?

There is certainly abuse in the current system, and I saw some of that when I
was involved in that industry. Your example of an appraisal being 11 times what
an asset is sold for is pretty extreme.

Once you have donated an asset to a charitable organization, you lose control
over how it is marketed. Cash-strapped charities often dump donations to make
payroll, rent, meet program funding commitments, etc.

If you pay $100,000 for a Junkercraft, take good care of it for a few years,
add some upgrades, and then get an indendent survey for $100,000 it's worth a
figure closer to that $100,000 than the $9,000 you suggested in the
hypothetical example.

Doesn't matter Chuck.

The only thing that unique items (which all cars, boats, etc are) can be
honestly valued by is what they are actually sold for.

Like I said, I know folks who have abused this. There are some really
interesting people out there, and if you think a bit about the current
hurricane damaged boats around in the salvage yards, I bet you can figure
out the scam that more than a few high net-worth folks run with this little
game.

Its long past time that it was stopped - it may have been legal, but its
way, way improper.

Under the old system it was entirely possible to buy something for a few
thousand bucks, spend a few more getting it into "operating" condition, then
get a C&V survey for $100k and donate it, taking more off your tax bill than
you spent!

That is, the government is actually PAYING YOU to perform this transaction (!)

That is the kind of abuse that was going on, and there is no way to stop it
other than to force the deduction to be the actual resale value recognized
by the charity.

--
--
Karl Denninger ) Internet Consultant & Kids Rights Activist
http://www.denninger.net My home on the net - links to everything I do!
http://scubaforum.org Your UNCENSORED place to talk about DIVING!
http://www.spamcuda.net SPAM FREE mailboxes - FREE FOR A LIMITED TIME!
http://genesis3.blogspot.com Musings Of A Sentient Mind

In article ,
DSK wrote:
I for one am glad that this loophole was closed, because there was simply no
way to fix the old way it was being done.

?? Maybe to make people rationalize the amount of the deductions
relative to the valuation of the donated boat or car? I think this was
shooting mice with an elephant gun.

Consider Doug the person who buys a sunk hurricane damaged boat for $20k.

Its trashed, of course.

He manages to get the engines running, and cleans the boat up. He puts
maybe $10k into doing it, because oh, he owns or has available a boat yard.

He now has a boat that he has $30k into. Of course reality is that its only
worth $30k, but only if you look real closely. If you don't then you won't
notice that the wiring is rotting from the inside out (and will cost $30k to
replace), or that the genset was a take-out with 4,000 hours on it and while
it runs, it might not for very long. Or that the mains have significant
cylinder damage from the immersion - oh yeah, they run - for now - but soon
they'll need to be either majored or longblocked.

He "donates" that boat and looking on Yachttrader, finds a similar one that
is selling for $150,000. So that's his "value" for his tax write-off.

Now if he's in the 39.6% bracket, he realizes a real dollar savings of about
$60,000. But he has only $30,000 in the boat!

So he just got the government (that'd be you and I) to PAY HIM $30,000 to
"donate" the boat.

The scam unwinds when the charity goes to sell the boat, and the prospective
buyer determines what was done. He offers to buy the boat for $30,000 (its
real fair market value), and ultimately, the charity capitulates, since
otherwise they get nothing out of it - and $30k is better than nothing,
right?

However, the original fleecing of the public has still taken place - and it
was all perfectly legal.

This only works for high-tax-bracket individuals, but if you think there
weren't literally HUNDREDS of people thinking of this very angle with
the 'Canes this year before the loophole was closed, you're nuts.

I know people who have, and were, and its a pure rip-off of the public.

--
--
Karl Denninger ) Internet Consultant & Kids Rights Activist
http://www.denninger.net My home on the net - links to everything I do!
http://scubaforum.org Your UNCENSORED place to talk about DIVING!
http://www.spamcuda.net SPAM FREE mailboxes - FREE FOR A LIMITED TIME!
http://genesis3.blogspot.com Musings Of A Sentient Mind