Corrections or additions?
These articles by Barbara Fox were published in U.S. 1 Newspaper on September 2, 1998. All rights reserved.
Bottom Line on Car Donations
It would be easy to use an overblown estimate of your
car’s value on your income tax. The charity does not legally have
to tell you how much or how little your car sold for, and the IRS
has as much as said it is not looking for such small pickings when
it does an audit. But do you even want to?
The American Cancer Society sent a letter saying that the fair market
value of my car was $4,050, based on my description of the condition
as "good" and without reference to any particular source.
The American Lung Association sent a more complete form valuing my
car at $3,750 at retail, or $2,450 for a trade-in, based on the N.A.D.A.
Official Used Car Guide and suggesting I should adjust this estimate
to "fair market value" based on options and condition. (They
hadn’t asked, and I hadn’t told them, that it didn’t have a working
radio or power windows and doors, and on and on.)
I could file either of these forms with my income tax and flourish
them at an audit, and the IRS would have a hard time proving that
my car was worth less. Much less.
When I checked with a car dealership and presented the whole sorry
picture (dents in the side, no power windows or doors, radio malfunctioning)
I learned it was termed "unsaleable" and worth only $1,200
as a trade-in.
So if I were in a 40 percent tax bracket and (falsely) claimed $4,000
retail value, 40 percent of $4,000 would mean $1,600 off on my tax
bill, compared to the $1,200 I would get for a trade in. My net profit
for this unrealistic claim: $400.
Nevertheless, my profit would shrink if I went out and bought a new
car. That’s because donations of a more expensive car can jeopardize
savings on the sales tax you get when you use the car as a trade-in.
In New Jersey, when you trade in a used car to buy a new car, you
pay sales tax only on the cash you hand over.
Here’s how it would work for me: If I buy a new car for $20,000, I
will pay $1,200 in state sales tax, $200 more than I would have paid
if I had used my old car as a trade-in. My net "profit" would
be $200 plus a very guilty conscience.
I don’t want a guilty conscience, and that’s one of several reasons
why I’m going to keep the car. When I decide to junk my clunker, I
might donate it, but not for profit on a tax deduction. If I go the
donation route, it will be because I like the charity.
— Barbara Fox
September’s Inc. Magazine jumped out at us as we were
putting together the final pieces of this issue of U.S. 1. The cover
story was called "Ben’s Big Flop," and it documented how Ben
Cohen — he of Ben & Jerry’s ice cream fame — had tried to
help save the Amazon rainforest though a for-profit company called
Community Products Inc. This cautionary tale of good intentions gone
sour makes an interesting comparison to this issue of U.S. 1, which
has a fistful of stories about nonprofits that funnel in-kind donations
to other nonprofits, and foundations that take advantage of the trend
in "relationship" marketing. See page 15 for Barbara Fox’s
Another story in the September issue of Inc., "Divorce-Proofing
Your Company," didn’t seem as relevant — until we discovered
that it was focussed on Liza Price and Donn Rappaport and contained
a dissection of how their divorce affected their company, American
List Counsel, the 85-person firm on Orchard Road (http://www.amlist.com).
When U.S. 1 wrote about Price last summer (June 18, 1997), she was
immersed in her new role as founder of Amateur Golf Tournaments (http://www.amgolftour.com).
wasn’t ready then to unpack the baggage of her divorce and the company
she lost, but both she and Rappaport cooperated with Inc. writer Stephanie
Gruner. The result is an apparently balanced account of the "golden
couple" who 10 years ago were "young, attractive, entrepreneurial,
and known for throwing great parties. Price’s risk-averse instincts
tempered Rappaport’s zeal for growth. Though often at odds on business
decisions, the pair both worked hard to run the company professionally."
This also is a cautionary tale, because Price and Rappaport are pictured
as doing everything right, distinguishing between their personal and
professional relationship from the beginning. What saved the company
was a partnership agreement with a "shotgun" clause that ruled
U.S. 1’S AUGUST 26 cover story by Chris Mario, "One Old House,
To Go," was informative and well written. But on page 46 it mentions
that the Plainsboro Historical Society was against the move of the
house to Memphis. That is not true. We believe in saving old houses,
even if they are moved out of state. We wish Jim Hollingsworth good
luck in his endeavor.
Plainsboro Historical Society
happy they gave Jim the opportunity to move it. This has not always
been the case, as they have a dismal record of tearing down old farm
houses and farm outbuildings.
An August 26 story on an inch-thick collection of print ads, "High
Response Newspaper Advertising," failed to provide contact information
for the publisher, U.S. Institute of Marketing. Robert Steckel heads
the firm at 531 Fifth Street, Oakmont PA 15139, 412-828-2720 or 800-627-5384.
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