IRS Discusses Questionable Deductions for Donated Vehicles: The American Jobs Creation Act of 2004 limited a donor's deduction for contributions of a vehicle, including an auto, with a claimed value of more than $500 to the gross proceeds from the charity's sale of the vehicle. But an exception allows a donor to claim a FMV deduction if the vehicle is sold at a price significantly below FMV to a needy individual in direct furtherance of the charity's exempt purpose of helping the poor or underprivileged who need a means of transportation. Some charities have sold donated vehicles at auction and claimed that the sales qualify for the exception. The IRS' position is that vehicles sold at auction are not sold at prices significantly below FMV. So, the IRS won't treat vehicles sold at auction as qualifying for the exception for sales to needy individuals at prices below FMV. To view the complete announcement, go to http://www.irs.gov/newsroom/article/0,,id=152030,00.html. IRS also reminds taxpayers that in order to claim itemized deduction for a vehicle donation in 2005 tax year, charity receiving vehicle must provide written acknowledgment within 30 days of vehicle's sale of gross proceeds of sale. To take a deduction of $500 or more, taxpayer must attach sales acknowledgment to return. IRS also indicated that taxpayer can take deduction on 2005 return for vehicle donated in 2005 even if vehicle isn't sold in 2005, because taxpayer can only take deduction in year vehicle is transferred to charity. (IR 2005-149) http://www.irs.gov/irs/article/0,,id=152127,00.html
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