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Car Auction

  • 1.  Car Auction

    Posted 06-07-2022 02:18 PM

    Hi Wise and Generous Community –

     

    You may remember me as the person who asked about raffling a car a few weeks ago (eeeek!)

     

    We now plan to auction it off during a live auction. 

     

    Looking for advice on how to proceed with an email notification inviting participants to submit a proxy bid and the nuts and bolts of transferring the car to the winner.  Do we collect sales tax? Should my university take control of the title?  What are the IRS implications?

     

    Thank you very much!


    reed



  • 2.  RE: Car Auction

    Posted 06-07-2022 02:49 PM
    Reed, you will need to work out the car transfer details with your CFO.  But you cannot sell it if you don't own it.  So yes, the title must be in your name.  And if you don't own it there cannot be a charity auction.

    I do not know your internal accounting and asset transfer protocols.  I am guessing the CFO will follow similar guidelines as to when you have previously transferred any owned assets to other organizations or individuals.  The fact this asset is being sold via an auction will not affect those protocols.

    All charity auctions are subject to state sales tax regulations in states with state taxes.  However, most charities do not "collect" taxes from the buyers at a charity auction.  They pay the required taxes from auction proceeds.

    You will also want to talk to Counsel about any laws regarding conducting this "sale" online as interstate commerce laws.

    And both your CFO and Counsel will need to be involved in the proper execution of IRS Form 8282, assuming the vehicle in question was donated to you within the last three years.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987






  • 3.  RE: Car Auction

    Posted 06-07-2022 03:25 PM
    Adding to John's comments, you will be required to fill out IRS Form 1098-C if the car is worth more than $500. This form both acknowledges the donation of the car to you, and its subsequent sale in an arm's length transaction. IIf the car sells for less than FMV, it will also limit the car donor's deduction to the sale price.

    Note also that some states waive sales tax for nonprofits for fundraising events, under various circumstances. 


    Thank you,
    Isaac Shalev
    Data Strategy Expert
    Sage70, Inc.
    (917) 859-0151
    isaac@sage70.com

    Schedule a 30-minute consultation now:







  • 4.  RE: Car Auction

    Posted 06-09-2022 02:32 PM

    Thank you, Isaac and John, for this helpful information.

     






  • 5.  RE: Car Auction

    Posted 09-09-2022 09:47 AM
    Our Foundation has also received a vehicle to be auctioned. This thread has been most helpful. An additional question ... are we correct in understanding that we are not required to obtain a qualified appraisal?

    ------------------------------
    Jana Fross
    Operations and Data Coordinator
    HaysMed Foundation
    jana.fross@haysmed.com
    ------------------------------



  • 6.  RE: Car Auction

    Posted 09-09-2022 10:45 AM
    You do not need a qualified appraisal, but you do need to determine the FMV of the car and share it with bidders, so that the eventual buyer at auction can claim a deduction if they buy the car for more than the FMV. If the FMV is not communicated to bidders, the IRS considers the FMV to be the actual final auction price. Only if the FMV is known to bidders does the IRS consider above-FMV bids to have a donative intent. 

    In practice, you can pretty easily get an FMV for free through Kelly Blue Book or Edmunds, or even through obtaining a purchase offer from Carmax or the like. Just document your method!


    Thank you,
    Isaac Shalev
    Data Strategy Expert
    Sage70, Inc.
    (917) 859-0151
    isaac@sage70.com

    Schedule a 30-minute consultation now:







  • 7.  RE: Car Auction

    Posted 09-09-2022 10:56 AM
    Thank you, Isaac. I didn't communicate that message as I had intended. Sorry! We will actually take possession of the vehicle and then sell it. So we are reviewing the documentation for we will need to provide to the donor (Forms 1098-C, 8283, etc.). It is not clear for me if the donor can take the appraised value of the vehicle (in which case there would need to be a qualified appraisal) or the value it sells for at auction. Can you offer any advice on that?

    ------------------------------
    Jana Fross
    Operations and Data Coordinator
    HaysMed Foundation
    jana.fross@haysmed.com
    ------------------------------



  • 8.  RE: Car Auction

    Posted 09-09-2022 11:17 AM
    The donor is responsible for determining the value for tax purposes.  Under no circumstance would the charity provide this guidance.

    The short answer is that the value a donor can claim will depend on whether it is donated for a related or unrelated purpose.

    While a 1098-C is required (or a facsimile), a descriptive receipt is also in order.

    Please review IRS Publications 4302 and 4303.  4302 is "A Charity's Guide to Vehicle Donation."  4303 is "A Donor's Guide."  The later will tell the donor what they need to determine a deductible amount.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987







  • 9.  RE: Car Auction

    Posted 09-19-2022 01:23 PM
    Good afternoon,

    Please consider this scenario.  What are the formal rules/best practices regarding "Foundation A's" requests?

    Foundation A funded a department chair, and has decided they should be involved in the selection of the chair.  

    Foundation A's benefactor was married to Foundation B's benefactor. Both are deceased.  Foundation B also established a chair.  Foundation A wishes to be consulted about that selection, as well.

    At the very least, Foundation A would like to be consulted before the chair is appointed.

    Thank you,

    Heidi
    Orlando, FL





  • 10.  RE: Car Auction

    Posted 09-19-2022 01:49 PM
    Permitting this involvement would violate the IRS rules regarding donor control. The short version states that for a gift to be considered a gift to an organization, you must be able to demonstrate that the organization has been given irrevocable and complete control over the disposition of the funds.

    When you let a donor be involved in selecting a chair - or a scholarship recipient - those conditions are not met. Unfortunately, this also means that the gift does not meet the requirements to be considered tax-deductible. So no receipt can be issued until the donor relinquishes that control.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987