Notice 2007-70 Gift of Cars Reporting Change

GiftLaw Note: Many donors give vehicles to charities. In most cases, the cars, boats, RVs and aircraft have a fair market value that is less than their cost basis, since the property has depreciated. When donors give vehicles with fair market value less than basis to charity, the deduction is usually an amount equal to the gross sale proceeds of the vehicle.

There are two categories. First, if the charity sells the vehicle within 30 days, the "sale" category rules apply. Under the sale category rules, the receipt to the donor must list the name and Social Security number of the donor and the vehicle identification number, and must also state that the vehicle was sold "in an arm's-length transaction between unrelated parties." The receipt must also show the gross proceeds of the sale plus state that the charitable deduction may not exceed the gross proceeds.

Form 1098-C may be filled out with this information and sent to the donor. Form 1098-C (or another qualifying statement) must be received by the donor within 30 days of the sale of the vehicle. Because many charities sell vehicles at auctions where the prices are often below Blue Book, the deduction for gifts of vehicles may be greatly reduced.

The second category is the "hold" category. If a charity plans to hold and use the vehicle, then within 30 days it must certify to the donor its intended use of the property and the intended duration of such use. The charity must also promise that the vehicle will not be sold prior to the anticipated "completion of such use." In addition to the certifications listed above, Form 1098-C must also list the donor's name, donor's Social Security number and the vehicle identification number.

Because the charity is holding the property there is no maximum charitable deduction limited to gross proceeds, as is the case in the sale category rules. As a result, a donor will follow the traditional charitable deduction rules with respect to gifts of tangible personal property, i.e., fair market value.

If the vehicle is sold for $500 or less, the donor may deduct the lesser of the vehicle's fair market value or $500. If the donee organization sells or gives the vehicle to a needy individual, the donor may deduct up to the vehicle's fair market value.

Notice 2006-1, 2006-4 I.R.B. 347, provides guidance on the reporting requirements under § 170(f)(12)(D) of the Internal Revenue Code. If a donee organization receives a contribution of a qualified vehicle, with a claimed value of more than $500, after December 31, 2004, the donee organization is required to provide a contemporaneous written acknowledgment to the donor. Notice 2006-1 specifies that the donee organization may use a completed Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, for the contemporaneous written acknowledgment. The notice also specifies that the Form 1098-C along with Form 1096, Annual Summary and Transmittal of U.S. Information Returns, be filed with the Internal Revenue Service Center, Ogden, UT 84201-0027.

However, starting on Jan. 1, 2008 the filing location is changed. After that date all Forms 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, along with Form 1096, Annual Summary and Transmittal of U.S. Information Returns must be filed with either the Internal Revenue Service Center, Kansas City, MO 64999 or the Internal Revenue Service Center, Austin, TX 73301.