removeps-groups[at]yahoo.com <removeps-groups[at]yahoo.com> wrote:
- quote -

If his marginal rate is 25%, he has a tax savings of $250 versus
selling the painting for $5000. An economically rational person
would have sold the painting. But if the taxpayer was economically
irrational, you are correct.

Dick

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On Dec 15, 10:17 am, rdad...[at]panix.com (Dick Adams) wrote:

- quote -

However, I think one should do the calculations required by line 10
Taxable Refunds. The following sounds logical: Say the donors
standard deduction is $6000 and the itemized deduction if they did not
donate the $5000 item was $1000 or less, then then they did not get a
benefit from deducting the painting, so no other income. If their
itemized deduction without the painting was between $1000 and $6000,
then the donation of the painting is worth (itemized deduction without
painting - $1000). And only if their itemized deduction without
painting was $6000 or more do they report the full amount as Other
Income.

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removeps-groups[at]yahoo.com <removeps-groups[at]yahoo.com> wrote:
- quote -

Works for me - no FICA, no Medicare, no self-employment tax.

Dick

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On Dec 8, 5:37 pm, rdad...[at]panix.com (Dick Adams) wrote:

- quote -

Would that be Line 21 Other Income?

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"Stuart Bronstein" <spamtrap[at]lexregia.com> wrote in message
news:Xns9B6F7A07C4B6Favocatstuyahoofr[at]130.133.1.4...
- quote -

I am not suggesting the museum was helping the destitute. I was suggesting,
as you are (apparently) that it is ok for the museum, under limited
circumstances, to return the painting to the donor, if it is in their
charter/bylaws, etc. and fills a legitimate purpose. And, if so, I believe
this distribution does not constitute income to the recipient. Another
poster indicated that the recipient's basis in the painting is now zero, so
he would have no charitable deduction if he gave it away again.

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Harlan Lunsford <lunstax[at]bellsouth.net> wrote:
- quote -

If you read the NY Times you'd already know the answer. ;-)

Stu

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rdadams[at]panix.com (Dick Adams) wrote:
- quote -

I'm pretty sure the "smell test" is authorized in the regulations.

Stu

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sethb[at]panix.com (Seth) wrote:
- quote -

Normally, yes. But if the gift were structured as a charitable lead
trust it could be done. And the donor would get a deduction for the
fraction of the value of the artwork that represented the actuarial
value for the time the nonprofit would have it.

- quote -

A museum is not allowed to do that. At least, a nonprofit museum is
not allowed to.

- quote -

Because it's not allowed to make such a gift.

Stu

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rdadams[at]panix.com (Dick Adams) wrote:
- quote -

If you insert language in a nonprofit's bylaws that says that its
exempt purpose includes, "to make distributions that would otherwise be
nonqualified, but will add to the organization's good will" the IRS
would deny tax exempt status - right after they stop laughing.

- quote -

Yup. Or disposes them pursuant to its exempt purpose. That's the law.

- quote -

That bears repeating.

Stu

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"Gil Faver" <rowdy'sboss[at]xxyz.com> wrote:

- quote -

Nonprofits are not allowed to make "gifts" but can make distributions
to the extent that they are within their exempt purpose. Normally the
exempt purpose of a museum is not to help the destitute, so it would be
improper for them to do that.

Stu

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- quote -

If that is the case, the painting still belongs to the 501(c)3, and is held
by the individual as constructive trustee. That being the case, the
individual does not own it, and thus has no income.

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Seth <sethb[at]panix.com> wrote:
- quote -

You may argue that. But I doubt it will go very far.
- quote -

disposes of assets, it either sells them or gives them
to another public charity.

I can see an reasonable exception for returning to
the original donor. But the donor, if they took an
income tax deduction, has income to be recognized.
If that was not the case, donations and return of
donations would be tax shelter.

Dick

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Seth <sethb[at]panix.com> wrote:
- quote -

Upon audit. Keep in mind that "doesn't seem right" is
more than adequate grounds for an auditor to disallow
a deduction.

Dick

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Seth <sethb[at]panix.com> wrote:
- quote -

It all depends on the increase in FMV since it was donated.
All the OP said was the painting was appraised at over
$5,000. After all the discussion, I would hope it was
close to $30,000.

My position is the OP has income to the extent of his
2004 deduction in the year of return. (He should try
to push it into 2009 - for a better opportunity at tax
planning.) If the current FMV 50% higher, then if he
amends his 2004 return to erase the charitable deduction,
then he can donate or sell immediately and take the
current FMV as a deduction or as his basis. Otherwise
he has to wait a year.

Plus I see no penalties because it was a legitimate
deduction in 2004.

I just do not believe a 501(c)3 can gift its assets
to private individuals so he has income in the year
of return and not much time to tax plan.

Dick

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"Seth" wrote:

- quote -

No, but his mother did, and his basis is the same as hers: $7,000. You
might want to check out the guidelines for valuing donations in Pub 526.

--
Phil Marti
Clarksburg, MD

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In article <YDU_k.324$c35.321[at]nwrddc02.gnilink.net> ,
Phil Marti <prm20871[at]verizon.net> wrote:
- quote -

So? Suppose the museum sold it for FMV (say, $7K at the time), his
mother bought it, and gave it to him (under the $13K gift limit, so no
problems there). He's still have it back in his hands.

- quote -

And at no expended cash (this time around) either.

- quote -

Since when has "seems right" had anything to do with taxes?

Seth

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In article <ghgend$lho$1[at]reader1.panix.com> ,
Dick Adams <rdadams[at]panix.com> wrote:

- quote -

With no 2004 deduction? That could be painful (underpayment of taxes
plus 3-4 years of interest and penalties).

Besides, he _did_ donate it in 2004.

Seth

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In article <hPC_k.329$7I6.68[at]nwrddc01.gnilink.net> ,
Phil Marti <prm20871[at]verizon.net> wrote:
- quote -

It could be argued that returning it is done for the purpose of good
will / favorable publicity, (and thereby make future contributions
more likely) which ought to satisfy the "exempt purpose" clause.

Seth

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In article <ghe2q6$n31$1[at]reader1.panix.com> ,
Dick Adams <rdadams[at]panix.com> wrote:
- quote -

But there was no such clause. The donor didn't expect it to be
returned (and, in the cases described, the donor certainly didn't
expect it to be returned; his heirs acted).

- quote -

Since the museum has no obligation to return it to him, why wouldn't
it be considered a gift?

Seth

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Harlan Lunsford <lunstax[at]bellsouth.net> wrote:
- quote -

With the Matisse, you could argue you that your income
was in excess of the FMV of the Van Gogh you previously
deducted. With the Rodin, you have straight income.

- quote -

This is not the first time a Cubs fan has wanted a fight
with me. But I have no reason to fear the minions of
the Wrigley Graveyard for like their team then have lost
their last eight post-season forays.

Get uppity with me and I'll start a rumor that you drink
blended Scotch.

Dick

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