Pyrafan <pyrafan[at]aol.commuhhuh> wrote:
- quote -

I read this as a partial sale, partial donation.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Art Kamlet wrote:
- quote -

If this were a donation of appreciated property, that might
be relevant. It was a SALE of appreciated property. Part of
the proceeds of the sale were donated.

I don't know why this was so confusing. Seller. Buyer.
Donation.

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Pyrafan <pyrafan[at]aol.commuhhuh> wrote:

- quote -

You realize that since he donated appreciated property, he
is limited to using only 30% of AGI as his donation, and if
he had more than that, he could have carried the remaineer
forward.

So in this limited case, he could have actually had a
carruyforward?

- quote -

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Thanks for the responses. The decision was made to make the
sale at the offered value and make the NPO donation
directly.

In answer to the "dancing around" question, the seller is
anxious to keep his tax due at zero, if possible. Because of
a combination of Schedule E losses, child tax credits, and
medical expenses, the additional Schedule A benefit of a
donation in the amount of the pledge would not be fully
realized. I did misunderstand the marginal tax rate, which
TurboTax Schedule D shows at 10%, so fears of a 28% "take"
were unrealistic, though the seller may yet have a balance
due.

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pyrafan[at]aol.commuhhuh (Pyrafan) wrote:

- quote -

Why all the dancing around? You get the same tax effect by
merely selling the "collecteble" for FMV ($10) and claiming
the capital gains (at 25% or less) and then donating $2K to
the charity. The capital gains rate will NOT be higher than
your highest marginal tax rate (see the worksheet in the
Schedule D instructions), so that is a wash. Involving the
buyer in this scheme is not necessary.

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bdsouza[at]yahoo.com (Brian D'Souza) wrote:
- quote -

[snip]
- quote -

Likewise, the seller would not get the deduction, because he
did not make the contribution; his full benefit comes from
the reduction in taxable gain.

If the seller takes the deduction, it smells like fraud; if
the seller doesn't, he's found a new way to pay too much
tax, because both lose the deduction.

--
Chris Green

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pyrafan[at]aol.commuhhuh (Pyrafan) writes:

- quote -

I want to make sure I understand. The item is worth
$10,000. You want to sell it for $8,000 with the purchaser
giving the other $2,000 to the NPO as fulfillment of your
pledge.

I don't see any problem, BUT:

1. Whether this satisfies your pledge is between you and the
NPO.

2. The purhcaser doesn't get a deduction for the $2,000
because he spent $10,000 ($8,000 to you and $2,000 to the
NPO) and got $10,000 worth of merchandise.

As long as no one tries to pretend that there was a
charitable contribution in all this, there's nothing wrong.

Phil Marti
Topeka, KS

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pyrafan[at]aol.commuhhuh (Pyrafan) wrote:

- quote -

I'll bet there is no specific rule covering this. And that
the IRS would characterize this as fraud, if they were to
discover the conditions placed on the buyer.

The buyer would certainly not be entitled to the deduction.
He has received something tangible of value in exchange for
his contribution, specifically, a $2,000 discount on the
purchase.

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I know more or less how tax *deductions* for collectible
capital gains work. I don't know this.

Situation: A collectible needs to be sold to raise cash. The
offer is on the table for, say, $10K. The seller would like
to avoid as much of the 28% collectible capital gain as
possible. The seller also has a pledge to a 501(c)(3)
organization in the amount of $2K.

Is it any kind of red flag, or more important, fraudulent,
for the buyer to reduce the purchase price by the amount of
the pledge, then make a donation to the NPO in that amount
to take the deduction himself?

The seller gets a reduced capital gain, AND fulfills the
pledge, avoiding embarrasment as well as possible collection
activity. The buyer gets a deduction AND most likely
short-term cap gain tax on the increased gain when he
resells the collectible. Does the NPO have any
responsibility to the IRS when a third party fulfills a
pledge? Or is this just a win-win one-time tax shelter?

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