Do you own a boat or a car you might donate to charity? Before you pull the trigger, consider another option.
Strategy: When possible, arrange a “bargain sale” to a qualified charitable organization. By combining a sale and donation, you get cash back from the charity, plus a write-off based on the property’s fair market value.
Many charities buy and sell vehicles, while others specialize in bargain sales and donations of boats (see below).
Here’s the whole story: For tax purposes, when you engage in a bargain sale, you treat part of the transaction as a sale and the other part as a charitable donation. The donation part is the difference between the asset’s fair market value and the bargain price. The sale part can result in a taxable gain if your basis is low.
To determine the amount of the taxable gain, adjust your basis to take into account both parts of the transaction. The formula for determining adjusted basis for th...(register to read more)