Hi all…here’s a question for you…We are donating some large and
small tools to a couple of craft organizations, thinking it was a
good thing to do …keeping the tools in good use and preventing us
from storing them. Seemed like taking a write-off would be an okay
compensation and get around the hassle of selling them. Our CPA
just told us that since they were depreciated , they have no "worth"
to donate!. Seems weird to me…not like an all day sucker that gets
smaller over time. If I could sell them and get income , then why
can’t I give them away and get fiscal pat on the back? There must
be some way that these great tools can be donated and we get some tax
credit. Any of you have any experience or ideas? We’ve already
promised them, and feel great about where they’re going. Thanks!
Marianne hunter.
Hi all...here's a question for you...We are donating some large and small tools to a couple of craft organizations, thinking it was a good thing
Marianne…Alas…you have already received the tax advantage when
you deprecieated the tools on your tax returns. If you were to sell
the tools for more than the depreciated value on your balance sheet,
you would be required to pay capital gains tax on the difference.
As far as a donation is concerned, all you can deduct is the
residual value that you carry on your balance sheet.
Howard
In the highly taxed (yet still beautiful) foothills near Eagle Idaho
Seems to me there’s some mechanism for converting business assets to
personal use, taking them off the business books. Then, it would
seem to me, their donation would be based on their fair market value
rather than any “cost basis”, which seems to me sorta what the asset
value of depreciated items is. I’m not sure of this, though. Heck,
it seems to me, too, that the asset value or depreciated value is
still different from the fair market value. Suppose you obtain
something at no cost in some manner. It does still have value to
someone else, and if you give it away, I’d be pretty sure it would
have some fair market value that could be deducted. You might ask
another CPA for clarification on this. Find one with experience in
small businesses, rather than some big corporate fellow. The other
question I’d ask is whether there’s a difference between these
questions applied to personal donations to be deducted from your
personal taxable income, vs. a business asset that would then be a
deduction by your business. I’m betting that somehow, on the
books, the entry would read that you bought the item from your own
company, then personally donate it for the deduction? Note that I’m
a goldsmith, not an accountant, and I generally rely on others. But
common sense sure seems like this should be possible.
Let us know what you subsequently find out. And remember, CPAs make
mistakes too. My brother is a CPA, and the chief financial officer
of a large health care company running a chain of hospitals. So
I’ve heard lots of interesting stories of just how many ways any
individual accounting question can be answered and handled.
cheers
Peter Rowe
Tax deductability depends on the organization receiving the goods.
If the organization you plan to donate the tools to is a non-profit
charitable entity, then you should be able to take a tax deduction.
Even though the tools have been depreciated, they still have value.
Get a second opinion from an accountant or an attorney who deals
with charitable giving.
Tim
The specifics of IRS rules governing the donation of property that
is part of your business can be found in:
http://www.irs.gov/pub/irs-pdf/p526.pdf on page 8, under the section
“Ordinary Income Property” and under “Capital Gain Property.”
The summary is that you can usually deduct all or some portion of
the fair market value of the item, with some adjustment to offset any
capital gain you might have from the natural gain in value of the
item over time.
I’d suggest that a closer reading of the IRS rules on the matter
might be in order by your CPA – and/or that you might want to
consult a CPA who is more familiar with charitable giving rules for
businesses.
Good luck!
Karen Goeller
kgoeller@nolimitations.com
http://www.nolimitations.com
Handcrafted and Unique Artisan Jewelry
First of all, were they shown as completely depreciated by your tax
return? That could be the crux of the problem to which your CPA
referred. My CPA told us that the IRS allows $500 for donations
without having to have documentation. Is the value you’re donating
greater than $500? How much are you going to have to invest in order
to replace these tools?
Betty
Hey Marianne! Listen more closely to your CPA…you’ve ALREADY gotten
tax credit on the items when you depreciated them over time. So go
ahead and donate them and feel good about it!
Donna in Dallas