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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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

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

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. :-)

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

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.