The donation may have kept you from owing taxes, but the fact remains that you either deducted more than you were allowed or you could make more money by selling the vehicle outright. Also, if it is a business vehicle, I'm sure it was fully depreciated; so I wonder how you were able to take that deduction anyway. I guess that doesn't really matter unless you get caught, but you might want to read the following copied from the IRS website, looks like it might also be a red flag now.(http://www.irs.gov/newsroom/article/...124191,00.html
For a taxpayer, donating a car to a charity has definite appeal. One can help a charitable cause, dispose of the car, and take advantage of tax provisions that are designed to support the generosity of Americans. Deductions are limited to the fair market value of the property.
In its recent study, the GAO estimated that about 4,300 charities have vehicle donation programs. In its review of returns for tax year 2000, the GAO estimated that about 733,000 taxpayers claimed deductions for donated vehicles they valued at $500 or more. Highly troubling is GAO’s analysis of 54 specific donations, where it appears that the charity actually received less than 10% of the value claimed on the donor’s return in more than half the cases, and actually lost money on some vehicles. While this study is important information for potential vehicle donors, it does not necessarily indicate that the charity is doing anything wrong. Most car donations result in small gains for the charity. From the charity’s point of view, often a small gain is better than no gain. The GAO states that its sample of specific donations was too small to allow generalization to all vehicle donations. But we cannot ignore the clear implications of the study. The Administration’s FY2005 Budget includes a proposal to curtail the problem of inflated deductions being claimed for donated vehicles by allowing a deduction only if the taxpayer obtains a qualified appraisal of the vehicle.
IRS enforcement efforts with respect to donated vehicles: We are educating donors and charities on what constitutes a well-run donation program. In December 2001, we alerted the public to a series of nine steps that individuals should take when donating their vehicles to ensure that a gift is to a recognized and reputable charity, and that the appropriate deduction is taken for the make, model, and condition of the vehicle. We have just released two plain language brochures regarding car donation programs, one for the benefit of the vehicle donors; the other for the benefit of charities. We will be partnering with the states to distribute the brochures to the fundraising community, as the states regulate fundraising activity.
On the compliance side, we have two programs. In the first, the IRS is focusing specifically on individuals who have taken deductions for vehicle donations. We are conducting approximately 200 correspondence examinations of vehicle donors to learn how donors are valuing their donated vehicles. In the second, the IRS is matching taxpayers’ Forms 8283, which substantiate large deductions for donations of various kinds of property, against Forms 8282. We believe non-cash donations of property other than vehicles may be an equal or larger problem. Based upon what we learn from these programs, we will decide what further compliance actions may be necessary.
SORRY THIS WAS SOOOOO LONG.