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The article about the saga of the Open 50 Pegasus written by our newest member of the SA Team, Sportboat, generated a number of e-mails from you all. The most interesting one was clearly this, which sheds some insight into the financial aspects of boat donation. Thanks to Rob Anderson for this article - Ed Sailing Anarchy, Your piece on the Pegasus donation and flip flopping at the Farm caught my attention. Having been responsible for boat donations at Berkeley for many years, I 'm constantly amazed at the flagrant disregard many have for the IRS regulations regarding boat donations. A vessel valued in excess of $5000 has to have an "appraisal" (not a survey) to establish market value ("what a willing buyer would pay a willing seller at that moment") . This is the responsibility of the donor. (It is a very foolish recipient that gets involved with valuation for the right-off) The written appraisal is sent along with a form #8283 to the IRS. Once the vessel is in the hands of the institution they may do anything they want with it. They can sail it, sell it, lease it ... whatever. The only problem is that, if they sell it, they have a reporting requirement (within the first 24 months) to notify the IRS as to what they sold it for. This then gets compared to the value established by the donor. If there is a difference (and there always is) the IRS will then go looking to the donor for the tax due on the difference. What about a lease? Well the same thing applies .... if there is an agreement that an individual will pay "X" amount of dollars two years out .... well that's a purchase agreement ... a value has been established within the two years. By not fulfilling the reporting requirement of the IRS codes, institutions put the donor at great risk. It is always amazing to me that big money types so often risk such a huge hassle. I guarantee that if the donor is audited, the first thing the IRS "Field Engineer" will do is go back and look at what was done with the donation. The solution is for the donor to state in their letter of donation, that the vessel shall be used by the institution for no less than two years. I went through an audit of one of our donors. The first question that the IRS asked was ... "when the vessel was donated, how much did you insure it for?" They are not dummies. They know that if someone writes off their beloved Islander Bahama for $50K and we turn around and insure it for $2500, something is a little amiss! Fortunately in this case the folks at the Farm have flip flopped away enough time that the two years will be up soon and Mr. Kahn might be off the hook. (Actually my favorite part of this saga is the part about ... " I have to sail the boat at least once for IRS purposes!" Great way to get your boss to let you have the keys to the rocketship!) One of these days the Stanfords and Orange Coasts of the world will have a donor take a big fall due to their negligence ... maybe then someone will listen. Keep up the irreverence. Rob
Anderson 08/06/2002 |
