Very Cool '63 Falcon 260/4-sp Black Plate CA Car (Donation!)

[Lynn]

Tony said: "Amazing that a car like this would have been donated to charity,..."


One reason would be if they have a very low basis in the car (got it years ago for $100) and figure it is going to bring $10k or better. If they sell, there will be capital gains taxes.

Suppose they already have a favorite charity in mind, and want to do something nice. Here is how it plays out.

1. They sell the car for $10k, then donate $10k to the charity. They have a capital gain for $9900, but offset that with the cash donation. So, it LOOKS like they only have to pay taxes on the remaining $100. However, depending on what other deductions they have, they may not meet the threshold for itemizing, taking only the standard deduction. Almost no tax benefit.

2. They donate the car to charity. They get a deduction for whatever the car sells for. No capital gain taxes, and the $10k deduction will likely make it worthwhile to itemize.

Yes, it is form over function; but that is how the code works. With highly appreciated property the difference can be staggering. These days, charitable giving folks like to say: “Cash = bad. Highly appreciated property = good.”