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Navigate tricky tax waters for boat, car sales to charity

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in Small Business Tax,Small Business Tax Deduction Strategies

Are you thinking of donating a boat or a car to charity? Maybe you can’t afford to simply give it away.

Strategy: Arrange a “bargain sale.” Unlike a regular charitable donation, you get cash back from the charity plus a write-off based on the difference between the bargain sale price and the property’s fair market value.

Will the charity agree to the deal? Many tax-exempt organizations will buy vehicles while others specialize in bargain sales of boats (see box).

Here’s the whole story: If you sell assets such as cars and boats to  charity at a bargain price, you must treat part of the transaction as a sale and the other part as a charitable donation. The part that’s considered a donation is the difference between the asset’s fair market value and the bargain price. The other part may result in a taxable gain if your basis is low.

To determine the amount of the taxable gain, adjust your basis to take into acc...(register to read more)

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