A (not so) silly tax question - charitable donation I made

[kaneohe]

You cannot deduct the sweater because you have no cost basis.

.

For a capital asset you acquired as a gift, your basis is sometimes the basis
of the giver. Is it different for a non-capital asset (I'm assuming that the sweater is that?)?

 

[MichaelB]

For a capital asset you acquired as a gift, your basis is sometimes the basis
of the giver. Is it different for a non-capital asset (I'm assuming that the sweater is that?)?

Capital gain property that has increased in value is an exception. The rule is the difference between fair market value and cost basis, as pointed out by the Zigmeister in post 11.

My comment on reward cash back is probably erred, and some mileage donations may indeed be deductable. My reasoning:

Cash back is not income, it is a partial refund of the purchase price. In effect, it reduces the effective cost of purchases. Rewards from credit cards other than cash, such as mileage, gift cards or goods and services, all have effective cost bases that are easy to determine because they are given in lieu of cash. The cost is the equivalent (or prevailing) cash reward. Therefore, any reward given by a credit card company that is directly related to purchases has both a FMV and a cost basis, and therefore qualifies as a charitable deduction, including mileage.

Some airlines have their own credit cards and credit 2x miles for travel charged using the credit card, (1 for the travel and 1 for the credit card) but may reflect all the miles on the airline mileage program statement. In this case, the miles that resulted from the credit card would be deductible.

 

[Texas Proud]

I would tend to agree they would not be deductible.

But just for fun, a couple of questions crossed my mind while reading the responses in this thread.

Can I take a donation for that sweater I got from aunt Hilda for Christmas if I donate it to the Salvation Army?

What about if I donate the cash rebate I got from my credit card reward program?

I see others posted... but IMO some are going on the wrong path...

You have a physical asset with the sweater that has a FMV... you get to deduct the FMV... it does not matter that you did not pay for it... the person who gave you the gift did...

As for the cash back... OF COURSE... why, because you donated CASH... it does not matter if you got your check and then signed it over to the charity.. it is considered cash...

(now, I am assuming that you are not donating so much that you are hitting the 30% and 50% rule... then you can deduct, but not use it this year)....


Now... I will ask another question related to yours... say you found the sweater... can you still deduct?

 

[freebird5825]

Ok...next tax topic for the Bird [-]who despises every iota of this process[/-] who is putting her nose to the grindstone.
Mr B gently [-]shamed[/-] talked me into tallying up my medical deductions today. My LTC premiums totalled $2123 for the year.
So my resident tax expert [-]darling live-in accountant man[/-] runs right to the IRS site and tells me there is now a $1230 annual maximum for LTC premiums for those who itemize on Schedule A.

Why do I feel a love letter from me to the Congress-critters coming on?

 

[Texas Proud]

Ok...next tax topic for the Bird [-]who despises every iota of this process[/-] who is putting her nose to the grindstone.
Mr B gently [-]shamed[/-] talked me into tallying up my medical deductions today. My LTC premiums totalled $2123 for the year.
So my resident tax expert [-]darling live-in accountant man[/-] runs right to the IRS site and tells me there is now a $1230 annual maximum for LTC premiums for those who itemize on Schedule A.

Why do I feel a love letter from me to the Congress-critters coming on?

This reminds me of my boss... the people that used to do the things I do and his outside experts told him to invest in R&D... (they did not follow the rules, but that is another story)... SOOO, he gets all these credits... and his taxes do not go down... he gets more credits... but still pays out the nose...

Seems that his AMT is so close to his 'real' tax that he can only take a few percent of the credits (this year... none... if my estimates are correct)... but the people who recommended it was able to take 100%...

I feel for ya...

 

[freebird5825]

This reminds me of my boss... the people that used to do the things I do and his outside experts told him to invest in R&D... (they did not follow the rules, but that is another story)... SOOO, he gets all these credits... and his taxes do not go down... he gets more credits... but still pays out the nose...

Seems that his AMT is so close to his 'real' tax that he can only take a few percent of the credits (this year... none... if my estimates are correct)... but the people who recommended it was able to take 100%...

I feel for ya...

Only in my wildest dreams would I ever be close to the dreaded AMT zone in my FIRE state.

However...when I was w*rking (as well as my husband), we were so close to AMT (combined gross income less itemized deductions for the house) it wasn't funny. One year, I had to write a few nice big checks to charities to reduce our AGI enough to avoid AMT.

It's a good thing I wasn't a member of this forum during the tax year I had to file as Single (due to widowhood) with no qualifying children. I was still w*rking as a GS-13 for the Fed and had a modest survivor pension. I was the slightly lesser earner of the two of us, so the household income was reduced by more than half.
My rants would have filled volumes for the change in my tax bill due as a result of being involuntarily changed from Married Filing Jointly to Single status.

 

[easysurfer]

I remember one year spending hours and hours making sure my charitable donations were up to snuff. But when tax time came along, for that year, it was more advantageous for me to just take the standard deduction. All that work for nothing except an exercise in good documentation.

 

[kaneohe]

I see others posted... but IMO some are going on the wrong path...

You have a physical asset with the sweater that has a FMV... you get to deduct the FMV... it does not matter that you did not pay for it... the person who gave you the gift did...


Now... I will ask another question related to yours... say you found the sweater... can you still deduct?

TP.....others on the fairmark.com forum agree w/ you
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If you donate clothing you bought to a charity, you get to deduct FMV of the clothing, I think, which is presumably less than what you bought it for. If you got the clothing as a gift, what is your basis in that clothing? Is it what the giver paid? If you donate that gift, you can deduct the lesser of basis or FMV?

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Re: Donation of Clothing
Posted by: Bill Brown (IP Logged)
Date: February 3, 2011 09:12PM

Your basis in a gift is the donor's basis.

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Re: Donation of Clothing
Posted by: Art (IP Logged)
Date: February 3, 2011 10:19PM


Bill's statement applies when FMV on date of gift is higher than donor's basis.

For gifts of clothing, I would assume FMV is lower than donor's basis, and FMV would be used as basis.

 

[Arnie]

But just for fun, a couple of questions crossed my mind while reading the responses in this thread.

Can I take a donation for that sweater I got from aunt Hilda for Christmas if I donate it to the Salvation Army?

I don't want to approach my auntie on this, but I think she made the sweater with yarn she got by trading her frequent flier miles.