IRS releases Form 1098-C for donations of cars, boats, and planes valued at more than $500

IRS has released Form 1098-C which a donee organization must use to report to IRS and may use to provide a contemporaneous written acknowledgment to donors contributing a motor vehicle, boat, or airplane and claiming a value of more than $500.

The Form 1098-C provided on IRS's website indicates that Copy A of the form is for informational purposes only and not to be downloaded, printed, or filed with the IRS. However, Copies B and C can be downloaded and printed to provide a written acknowledgment to donors. 

Background. Under the 2004 Jobs Act, the deduction for "qualified vehicles" (motor vehicles, boats and planes that aren't inventory or held for sale in the ordinary course of business) contributed to charity after 2004 for which the claimed value exceeds $500 is dependent on the charity's use of the donated property. If the charity sells the vehicle without any "significant intervening use" or "material improvement," or transfers it to other than a needy person at a price significantly below fair market value in furtherance of a its charitable purpose, the donor's charitable deduction can't exceed the charity's gross proceeds from the sale.

Form 1098-C and Instructions. The Instructions for Form 1098-C indicate that a donee organization must file with IRS a separate Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, for each contribution of a qualified vehicle for which the donor claims a value of more than $500. In addition, in order for the donor to claim a charitable contribution deduction, the donee organization must furnish a contemporaneous written acknowledgment of the contribution to the donor containing the same information shown on Form 1098-C if he contributes a qualified vehicle with a claimed value of more than $500. The Instructions to Form 1098-C indicate that Copy B of Form 1098-C may be used to provide this contemporaneous written acknowledgment.

Thus, donee organizations are to file Copy A with IRS by Feb. 28, 2006 (Mar. 31, 2006, if filed electronically) for contributions for which they completed an acknowledgment in calendar year 2005, and are to provide donors with Copies B and C of Form 1098-C or their own acknowledgment that contains the required information.

However, IRS cautions that Form 1098-C is not to be filed or used as a contemporaneous written acknowledgment for a contribution of a qualified vehicle with a claimed value of at least $250 but not more than $500. Instead, a donee organization should provide the donor with a separate acknowledgment that meets the requirements of Code Sec. 170(f)(8).

When Form 1098-C must be furnished to donors. The Instructions for Form 1098-C indicate that an acknowledgment is considered contemporaneous if it is furnished to the donor no later than 30 days after:

The date of the sale, if the donee organization is required to check box 4a (i.e., the donee's certification that the vehicle was sold by the donee in an arm's length transaction to an unrelated party), or

The date of the contribution, if the donee organization is required to check box 5a (i.e., the donee's certification that the vehicle won't be transferred before the completion of material improvements or significant intervening use) or 5b (i.e., the donee's certification that the vehicle is transferred to a needy person at a price significantly below fair market value in furtherance of a its charitable purpose).

Transitional rules. For contributions made before Sept. 2, 2005, an acknowledgment is considered contemporaneous if it is furnished to the donor by the later of the time prescribed above or Oct. 1, 2005.

For an acknowledgment furnished to the donor before July 6, 2005, a donee organization isn't required to include the information in box 4b (i.e., date of sale) or 5c (i.e., the donee's certification detailing a description of the material improvements or significant intervening use), and the box 5b certification requirement does not apply.

Source - Thomson/RIA (http:ria.tomson.com)