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Pyne, Waltrip, Lippert & Decker, LLP CPAs Litigation Specialists Business Appraisers Consultants “Where Planning Makes Cent$” POINTERS Volume 13 Issue 4 May 2004 Donald W. Pyne, CPA Catharine F. Waltrip, CPA Scott M. Decker, CPA Leatha L. McCoy, CPA finding of the GAO report mentioned ear- CHARITABLE lier is that, on average, 4,000-5,000 form CONTRIBUTION DEDUCTION 1040’s are reviewed to see if they have RULES MAY CHANGE audit potential. Anywhere from thirty to This spring has been a fun and interesting forty percent of these returns are then re- time for me. Our oldest daughter, Blythe, ferred to the field for audit. Based on the is a freshman at Camarillo High School One morning last month, as I came to GAO’s findings, do you know how many and is on the track team. Track was my work and waded through the sea of paper of these returns were actually audited sport in high school and college. So just that was flooding our office, I came across (hint: throw away any pre-conceived no- being at a track meet, with the smell of an article in the Wall Street Journal that tions of the IRS you already have)? The fresh cut grass and “heat stuff” (think caught my attention. I thought that you, answer: none. That’s right. Not one of Ben-Gay), brings back a lot of memories. my faithful readers, might also benefit them. Fortunately for Blythe, I was a distance from this information as well. runner and she is a high jumper. I say As a result, the Senate has recently ap- fortunately because it is so hard for me to It is estimated that vehicle donation de- proved an amendment to an international sit still and watch her run without giving ductions generate $654 million in tax sav- tax bill that generally limits car donation her advice about pacing, handing-off the ings each year (based on 733,000 tax re- deductions of more than $500 to the gross baton or using starting blocks. When she turns from the year 2000 reporting deduc- amount that the charity receives upon the is high jumping, I know there is no advice tions as a result of vehicle donations). sale of the vehicle. In the case where the I can give her that would help. Well, I The General Accounting Office (“GAO”) charity decides to keep the vehicle you guess I can tell her to relax and take her has issued a report finding that the pro- donate, the IRS would require appropriate time, but that’s about it. I can almost re- ceeds received by charities operating ve- documentation from you AND the donee late to those Little League parents when I hicle donation programs (there are cur- (the charity to which you gave your car). arrive at a meet and yell to Blythe on the rently more than 4,300 U.S. charities with The bill has yet to leave the floor of the in-field to ask what height she is jumping. annual revenue in excess of $100,000 that Senate, so it (like Cher) will most likely She always rolls her eyes but gives me the do so) was significantly less than the de- go under the knife again. information anyway. There have been ductions taxpayers were claiming as de- two big meets where her 4-by-400 meter ductions on their tax returns. Vehicle donations are not the only types relay team has neglected to check in and/ of non-cash charitable contributions rais- or show up timely at the starting line, and Based on the findings of this report, ing concerns among members of the Fi- I’m the crazy parent running down the Washington (the Senate Finance Commit- nance Committee. The amendment also stadium stairs screaming “you need to tee, in particular) is looking for a better places restrictions on donations of land, check in!” way to crack down on the amount of unre- art and intellectual property. alistically high deductions some individ- So, with League Finals and CIF Prelims ual taxpayers are claiming for the dona- Under the current law, generally, the fast approaching, I am coaching myself to tion of that oil-leaking, exhaust billowing amount allowable for a donation of prop- sit quietly in the stands and just watch. eyesore (AKA the “old car”). The panel erty to a qualified not-for-profit organiza- Somehow I know that will be a lot harder also has the IRS in its crosshairs. Another tion is the fair market value of the item. to do than it sounds. Pursuant to Reg. §1.170A-1(c)(2) “fair market value” is “the price at which the Cathy Waltrip property would change hands between a 1823 Knoll Drive . Ventura . California . 93003 805.650.8310 805.650.6213 fax E-mail: firstname.lastname@example.org Website: www.pwld.com willing buyer and a willing seller, neither being under compulsion to buy or sell…” Internet GETTING ORGANIZED In the case of a car, Rev. Rul. 2002-67 Hotspots of instructs us that an established used car Now that the tax deadline has come and pricing guide (like the Blue Book) may be the Month gone, if you’re like me, you’ve vowed to used if the guide lists the sales price for a By Leatha McCoy get your paperwork better organized for car that is the same make, model, and next year! Keeping track of your finances year, sold in the same area, and in the helps you to save time and money... same condition as the donated car. resources that always seem to be in short supply these days! Here is a simple sys- Despite all the bad news, rules and regu- tem that can help you keep those paper lations, limitations, stipulations and re- piles organized. strictions on the donations of non-cash items to charities, there are some amazing http://www.fandango.com benefits with respect to the donation of property with a value in excess of the do- We’ve all seen the funny paper bag peo- nor’s cost basis afforded the embattled ple on the movie screen talking about taxpayer. Please note, however, the fol- staying out of line by buying your movie lowing anecdote is not investment advice. tickets online. Yesterday I checked out Keep four files for the following informa- It is an illustration of an unbelievable use the website for the first time and discov- tion: of the Internal Revenue Code – which is ered it filled with loads of interesting in- completely legal. formation. On Fandango, you have access 1. The first is a “Permanent” file. This to movie reviews and trailers, news and is where you keep your home pur- gossip, current show times, guaranteed chase documents, car ownership re- tickets, and more. By registering at Fan- cords, insurance information, your dango, you have access to additional will and any other permanent record. benefits, including "My Favorites" theater A fire safe box is recommended for personalization, express purchasing, the this file. The favorable decision was reached in the Fandango Newsletter, and information on case of Herman v. U.S., 73 F. Supp.2d ticket availability for the most anticipated 2. The second file is your “To Do” file. 912 (E.D. Tenn. 1999). In this case the movies of the year. Fandango makes go- This is for your bills to be paid, in- taxpayers purchased some used hospital ing to the movies faster and easier than surance forms to submit, and other equipment at a bankruptcy auction for ever! items needing your current attention about $40,000. Two years later, they do- (no more late fees because of mis- nated the property to a hospital and http://www.irs.gov placed bills!). claimed an IRC §170 deduction of $1,019,864, based on two appraisals of 3. The third file is your “Paid” file, the property’s fair market value (roughly where you store the bills that you a million dollars more than they paid for have already paid. The easiest way Are you still waiting for your refund from it). In a refund action, the district court to organize this file is alphabetically the IRS and want to know where it is? essentially agreed with the taxpayers, by company name. Visit the IRS website at www.irs.gov to holding that the property had a value of find out if the IRS received your return, $1,002,380 at the time of the gift. The 4. The last file is for “Income Tax In- and whether your refund was processed formation”. During the year, put price paid at the bankruptcy sale was not and sent to you. good evidence of the value of the donated your tax-related documents in this property, according to the court, since the file. For example, if you donate To get your refund status, you’ll need to clothes to a charity, put the receipt bankruptcy court was under pressure to provide the following information as dispose of the property as quickly as pos- here. If you sell an investment, put shown on your return: the related information in this file. sible. Remember to include your DMV reg- • Your Social Security Number (or istration invoices as well as your This is only one of numerous examples of IRS Individual Taxpayer Identifica- providing meaningful benefits to a worthy W-2’s and mortgage interest paid for tion Number). that tax year. cause, while providing tax benefits to you • Your Filing Status. and your family. Your tax advisor knows • The Refund amount (it is important Staying on top of your paperwork will of many other ways to help you hold on help alleviate any panic that may come to enter the refund amount exactly as to YOUR money. with tax filing and save you time and it is shown on your return in order for money to boot! their computer system to retrieve Jeff Dottl your data). Karen Llata The goal of “Pointers” is to provide timely business, financial and tax information. Since space limitations require generalizations, we encourage you to obtain specific personal advice before implementing any ideas presented in this publication.
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