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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! 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 |
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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 |
Karl Denninger wrote:
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. 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. And, if one is in a high tax bracket and gets audited (and this kind of write-off is a BIG red flag), then you not only pay the tax you dodged, plus a penalty, you could (and should IMHO) land in jail. 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 $30,000 to "donate" the boat. Wait a minute, the gov't didn't pay me anything. That was money I earned every penny of! Isn't that a big part of President George W. Bush Jr's message? In any event, it is overkill to rewrite the whole tax code to close a "loop hole" that was really a matter of improvident enforcement. The problem is that it is all too easy to "get away with" this kind of crapola while other people have their assets siezed for ex-spouses back taxes. The IRS has done a rather poor job... and Congress isn't helping. Meanwhile, I notice you have nothing to say about the issue of charity's funding drying up, and the declining boat market in general as an economic indicator. DSK |
"Karl Denninger" wrote in message news:hvYfd.44497$bk1.31014@fed1read05... 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. Had a friend at the marina with a boat he picked up for about 5k, (been sitting in a marina yard for 4 years( put 1k into it, used it one season, shined it up nice and then donated it the following year, after not being able to sell it for 5k. The survey came in at 17k......even in the 33% bracket he came out ahead of the game. The guy that bought the boat from the charity paid 3k for it. -- -- 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 , P. Fritz wrote: 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. Had a friend at the marina with a boat he picked up for about 5k, (been sitting in a marina yard for 4 years( put 1k into it, used it one season, shined it up nice and then donated it the following year, after not being able to sell it for 5k. The survey came in at 17k......even in the 33% bracket he came out ahead of the game. The guy that bought the boat from the charity paid 3k for it. Exactly. The law's intent has always been that the donation must be valued at FMV. That's ALWAYS been the law. The "shortcut" of determining FMV by any means other than an ACTUAL sale to someone who spends REAL money is and was a fraud - and its a damn good thing they finally put a stop to it. -- -- 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 |
And, if one is in a high tax bracket and gets audited (and this kind of
write-off is a BIG red flag), then you not only pay the tax you dodged, plus a penalty, you could (and should IMHO) land in jail. Karl Denninger wrote: Nope. So long as he has a C&V survey with that number on it, he sails. Its not hard to find said C&V survey. How many IRS auditors are surveyors and could inspect the vessel - two years later after its been resold by the charity? It basically never happens. You get audited, but its a correspondance audit. You provide the proof of value, that's teh end of it. So if you have every i dotted and every t crossed, you walk? That doesn't sound like what you were talking about earlier. My observation is that under the former rules, the charity either had to keep the boat for at least 1 year or the donor could only write off the actual sale value less any labor expended by the charity. So he just got the government (that'd be you and I) to PAY HIM $30,000 to "donate" the boat. Wait a minute, the gov't didn't pay me anything. That was money I earned every penny of! Isn't that a big part of President George W. Bush Jr's message? So if you can steal as much of it back as you're able, its ok? I think not. So you're in favor of President Bush's huge deficits yet want to make sure that rich people pay the highest tax possible? You must be a rather mixed-up individual. Charities do not have a right to participate in a fraud upon the public to get their funding. They have been complicit in this scam for a long time. If it was legal, where's the fraud? Oh, the boat market is not declining. You must be smoking something really funny; show up at some of the shows and see what the exhibitors with the higher end boats say about their order flow and condition. Nope, I'm not smoking anything funny. I suggest you look past the happy faces & publicity hand-outs. Chuck Gould posted some Washington state statistic on the boat market there recently, did you look? DSK |
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