- quote -

"Seth Breidbart" <sethb[at]panix.com> wrote

- quote -

I won't disagree that that sometimes a person can't quickly
find a buyer for some item at its "fair market value." On
the other hand, the poster gave the premise of an item that
was "worth" three times what he could sell it for. Without
knowing more about what he was selling and why he could only
sell it for 1/3 of its value, it has a ring of gross
overvaluation. While I don't have enough information to say
it's overvalued, I think it's an issue worth raising, as an
IRS agent would almost certainly challenge such a valuation.

As for your example of the stamps, I think that the dealer's
sale value is not necessarily the correct fair market value.
Where there are multiple markets for an item, the
appropriate market must be determined before the fair market
value can be determined. If the stamp collector is not a
dealer and generally finds it impossible to sell it at the
dealer price, it would be hard to argue that the dealer's
retail catalog price is the appropriate market on which the
price should be based. If a sale by a non-dealer is
normally made at a lower price, the lower price is probably
the more appropriate market value.

Arbini v. Commissioner, TC Memo 2001-141
Max Weitz, TC Memo 1989-99

You're correct that there are cases where charitable
contributions make as much or more sense than selling
assets, but I believe that they are rare where the
appropriate fair market value is used. For that to work,
you must presume that an asset has to be "worth" at least
two to three times what the donor can sell it for, and that
situation does not present itself very often.

Brian Bivona, CPA

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Harlan Lunsford wrote:

- quote -

Actually IRC 280E would disallow the expenses of a drug
dealer (except, presumably, for "cost of goods sold").
However, I stand corrected on my prior statement because I
thought that 280E applied to ALL illegal activities, and it
apparently does not.

MTW

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MTW wrote:
- quote -

that a dealer of certain "unauthorized" narcotics would
indeed be allowed section 162 expenses against gross
receipts.

ChEAr$,
Harlan Lunsford

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Brian <bpbiv[at]yahoo.com> wrote:

- quote -

There are plenty of real-world examples of cases where all
recent sales of something are at a much higher price than a
person could get.

For instance, not-very-rare postage stamps that are no
longer available from the Post Office are typically sold by
dealers at 200% of face. A person would have a hard time
getting over face.

If the person were in a > 50% tax bracket (maybe that doesn't
exist this week, but it certainly has existed) he'd be
better off donating those stamps to a charity (providing it
doesn't sell them; using them to mail stuff should be fine)
than selling (or using) them.

Seth

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Seth Breidbart wrote:

- quote -

But hasn't the IRS taken the position that you are NOT
entitled to a deduction for expenses incurred in the
production of illegal income (even though the income itself
is fully taxable)? An extension of that theory would hold
that there is no basis, either. <g
MTW

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Arthur L. Rubin <ronnirubin[at]sprintmail.com> wrote:
- quote -

Wouldn't the cost of stealing it (supplies, mileage, etc.)
be the basis?

Seth

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Arthur L. Rubin wrote:
- quote -

Ah, but stolen property WOULD have a basis if thief had done
the right think and reported fmv on line 21 for year stolen.

ChEAr$,
Harlan Lunsfod, EA n LA
Sat, 23 Oct 2004 21:35:10

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Andy wrote:

- quote -

But stolen property has no basis, so does not qualify for a
charitable deduction unless held for a year.

;-)

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geoff2k[at]yahoo.com (geoff2k[at]yahoo.com) wrote:

- quote -

It depends on whether you stole the item or acquired it
legally. There are laws against selling stolen property. I
have heard of no laws against donating stolen property, and,
in fact is often judged to be honorable by politicians who
raise our taxes....

))))) Andy

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<geoff2k[at]yahoo.com> wrote:

- quote -

The only thing you didn't factor in was state income taxes
.... depending on your location, of course.

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- quote -

The only real flaw is that if you can only sell the item for
$3, there's a good chance that the fair market value is not
$10. The only way that your example can work out to where
giving the item away puts more money in your pocket than
selling it is if you can justify that "fair market value" is
more than 3 times what someone is willing to pay for it.
That sounds like a bit of a stretch. Fair market value is
generally what someone will pay for it. (Assumes a willing
buyer, a willing seller, each having knowledge of the
relevant facts & neither under compulsion to buy or sell.)

Brian Bivona

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geoff2k[at]yahoo.com <geoff2k[at]yahoo.com> wrote:

- quote -

Sure. Too many to list.

As a general rule, it is always better from a money point of
view to sell the item at FMV than to donate it to charity
and claim the FMV as a deduction. The commission and fees
you pay lower this advantage slightly, but I seriously doubt
the fees change the equation in favor of gifting rather than
selling.

However, the hassle factor of selling, and the good feelings
you get for making the gift might be "worth it" to you, even
if the money isn't there.

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

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- quote -

I cant answer your question but keep in mind, it is a moot
point unless you Itemize.. none of these "donate your car"
charities mention it.

I will assume there some disappointed folks at tax time that
learn they must give up their standard deduction and their
gain is quickly lost.

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geoff2k[at]yahoo.com (geoff2k[at]yahoo.com) writes:

- quote -

That's correct. You could have gotten to it much more
simply by just saying that 30% of $10 is $3 and therefore if
you could sell it for more than $3 you're better off selling
than donating.

Of course, if you don't itemize your deductions, the tax
benefit of the donation is $0, so you're always better off
selling than donating.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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Hi folks, this is likely a no-brainer for most, but for some
reason, it's taken me awhile to get my head around the math.

What I'm trying to figure out is at what point it makes more
sense to donate something to a local charity vs. trying to
hawk it on say eBay. I'm looking at this from a purely
selfish sense -- assume the item in question has got to go,
which way will allow me to retain the most money?

The simple example I've come up with is as follows:

income for the year: $100
tax rate: 30%
item value: $10

After taxes ($30) are deducted from my paycheck, I have $70
left. After I purchase the item, I have $60 left.

If I donate the item, the IRS allows me to deduct the FMV of
the item from my income, and if we assume FMV = purchase
price:

$100 - $10 = $90, 30% of which is $27

The IRS should refund me $3, and I'll have $63 in my pocket.

So in this case, if I can sell the item for more than $3,
I'll come out ahead.

Are there any faults in this reasoning?

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