Donation to charity's agent.

• Author: Laffie, Lesli S.

Rev. Rul. 2002-67 explains that individuals may claim a charitable deduction for automobiles donated to a charity's agent. According to the ruling, the agent's written acknowledgment substantiates the gift and explains when a vehicle may be valued using an established pricing guide.

Many charities that solicit individuals to contribute vehicles for a tax deduction use a for-profit business to operate the program. Three potential questions arise:

1. Has the automobile been donated to the charity or to the for-profit business that runs the donation program?

2. Is the gift properly substantiated?

3. Is the vehicle valued at fair market value (FMV)?

Rev. Rul. 2002-67's two situations illustrate the issues. Both involve a charity (C) and a for-profit business (B). These two organizations establish an agency relationship valid under applicable state law. The agreement provides that B, acting as C's authorized agent, will administer a fundraising program for C for a fee. C has the power to review and approve B's activities under the agreement.

Acting on C's behalf, B (1) solicits donations of used cars, (2) accepts, processes and sells the cars, (3) transfers the sales proceeds to C (less B's fee) and (4) gives each donor substantiation of the contribution, including an acknowledgment that contains the required Sec. 170(f)(8) information.

In the ruling's first situation, a donor who itemizes transfers a used car to B and does not receive anything of value in exchange. A used-car guide values the donation at $4,500 for a car of the same make, model and year as the donor's car and sold in his area, if the car is in excellent condition ($3,000 if in average condition; no value is listed if in poor condition).

According to the guide, a car is in (1) excellent condition if it has no defects; (2) average condition if it has some defects, but is safe to drive; and...