Why Donations Work

The IRS rules for market value determination are defined as can be seen in their publication 526, "Determining the Value of Charitable Donations". Similarly, yet separately, rules for the qualification, and resale of donated property are set forth in publication 561 (see appendix for publications and links). In many cases, the market value as determined by the IRS suggested methods allow for a tax credit that approaches that of a market sale. The rules for resale (following material improvements being completed) allow for resale by the charity at a price unrelated to the market value used for donation. This price may be below market as the charity simply wants to liquidate the vessel quickly and is not bound by the tax basis established earlier.

This works for donors when the tax benefit, both federal and state taxes included, approaches the selling price less the brokers fees and assumed price negotiations that would be expected in a market sale. It works for brokers since AIG pays the brokers directly and returns a central agency listing to them to market the boat for the charity, and for the charity when they receive the net proceeds from the eventual sale of the vessel.