What is a “Partial Cash Payment”?
This service is provided by Action Donation Services as an “exclusive” for donors to our client charities! It is one of the many unique benefits that set us apart from other services. The partial cash payment we are referring to is called by the IRS a “Bargain Sale” and is perfectly legitimate when properly reported. Your gift can be “partly a donation” and “partly a sale.”
The “partial cash payment” benefit is a win-win for both the donor and the charity! It generally results in higher value donations resulting in more money for the charity and allows the donor to receive some cash as well as the maximum legal tax deduction. Click on the following link for IRS info explaining a “bargain” sale: http://www.irs.gov/publications/p544/ch01.html#d0e592
Here’s how it works: For property (usually higher valued autos, boats, and/or RVs), we are able to offer the donor a “partial cash payment” as an incentive to donate the property to one of our client charities. The donor generally is entitled to a deduction equal to the difference between the cash they receive and the price for which the donation is sold on behalf of the charity. Donors receive from Action on behalf of our client charity a receipt (IRS Form 1098-C) within 30 days of the sale of their donated property . . . so they will know exactly what it sold for.
Note: according to new IRS laws, which became effective Jan 1, 2005, the fair market value of donated vehicles, boats, etc. is determined by what it sells for (the gross selling price). No longer can the donor claim, as a deduction, estimated book values. There are a couple of exceptions to this new rule, i.e. if the vehicle is valued at less than $500 or more than $5,000. If the donor is going to claim more than $5,000, they will usually need an independent appraisal. Donors are always encouraged to consult with their own financial/tax advisors before claiming any deductions.
Only certain higher value donations can qualify for a partial cash payment—we explain that carefully to all potential donors and evaluate their property at the time the donation is offered to the charity.