Rob Scanlan, CMS/MMS/ACMS Accredited & Certified Marine Surveyor gives the following guidance on the new law regarding donated boats, yachts and ships:
The new law states that the deduction value of a donated boat, yacht or ship is limited to the gross proceeds of a sale by the charity on the open market. There is however, exceptions to the gross proceeds rule which will allow you to deduct the fair market on the date it was donated. They are as follows:
An acknowledgement by the receiving charity, that it will make a significant intervening use of the boat or yacht, a detailed statement by the charity of its intended use, the duration of that use and a certification that the boat or yacht will not be sold for a period of at least three years. An acknowledgement by the receiving charity that it intends to make material improvements to the boat or yacht increasing it’s value, a detailed description of the intended material improvements and a certification that the boat or yacht will not be sold before completion of the improvements.
An acknowledgement by the charity that it intends to give or sell the boat or yacht to a needy individual(s) or to a charitable institution at a price significantly below fair market value. This provision applies only if the gift is in furtherance of the charity’s purpose.
A special rule applies for boats with a value under $5000.00. In this case a donor may claim a deduction for the lesser of the boats fair market value or $5000. Most charities will provide the acknowledgment required by submitting to the donor and to the IRS form 1098-C. If the charities acknowledge on this form one of the four exceptions noted above, then the donor is entitled to take the full appraised value of the yacht or boat as a charitable deduction on their Federal and possibly State tax returns in the year in which it was donated.
Any yacht or boat having a fair market value in excess of $5,000.00 must have a written appraisal by an Accredited & Certified Marine Surveyor.
Currently, the donor of a vessel with an appraised value in excess of $5000 submits an 8283 and 1098C tax form to the IRS showing the appraised value verified by an Accredited & Certified Marine Surveyor and the intended use by the charity. I have these forms which the charity receiving the vessel, must sign and certify that it will not sell the vessel within three years. The exception to this three year rule is if the donor accepts the immediate sale price realized by the charity as his tax deduction for the donation. After three years there is no reporting requirement as the donated asset is considered depreciated to a point where the appraised value is no longer meaningful.
If for some reason the IRS should take the gigantic step of completely changing their existing procedures and tax forms for charitable donations of yachts, ships & boats, I would be notified immediately. Donating your boat, yacht or commercial vessel is still a very viable financial alternative to an actual sale with many tax advantages.
Make sure that if you or your client will be donating a yacht, ship or boat it will be stated in writing, that the foundation will keep the boat or yacht for three years. Please call me if you have any questions about the new tax law and how it might relate to donating a boat, yacht or ship. To date I have appraised 1,075 yachts, boats and ships nation wide.