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Auto Donation Procedures Unraveled

1098-C

When the Charity received a donated car, it would give a form 1098C to the donor. If the car was sold by the charity already, it would list the sale proceeds on the form 1098C, which would limit the donor’s deduction.  If there are no sales proceeds listed, you can look at boxes 5a and 5b, if either of these is checked, the charity does not intend to sell the car and the donor would be entitled to an FMV deduction.  If neither of boxes 5a and 5b are checked, the charity probably intends to sell the car. [Note, the donor taxpayer may not get a copy of Form 1098C.  The charity is required to send that to the IRS and most charities use that as their acknowledgment to the donor, but they also are allowed to put that info from 1098C on an acknowledgement letter and give that to the donor.]

Form 8282

 When the charity sells the car (within 3 years of receiving it), they are required to file Form 8282 with the IRS. Also they are required to send the donor a copy of the form.   The sales proceeds info will be there (and should match the info on form 1098C if the sales proceeds were listed there as well.)   So for form 8282,  the donor may not receive it from the charity in time to file your tax return and you potentially may never receive one if the vehicle is never sold.  Most likely the vehicle will be sold. If you did not get a copy of the form 8282 from the charity it’s likely they did not know they had to send it to the donor (or the IRS for that matter). 

Form 8283

Is the form the donor taxpayer files with their return to get their deduction.  There is a portion in part IV for the charity to fill out and sign.  Some charities  give the donor this form with Part IV already filled out when they receive the donation.  This section is more of a reminder to the charity that they have to send the donor Form 8282 when they sell the property. And in almost all cases the question “Does the organization intend to use the property for an unrelated use?” should be checked “no.”  Yes to that question would mean the charity intends to use the vehicle , but not for charitable purposes (like if they ran an unrelated business).  If the box is blank, you can confirm with the charity and check the “no” box.

The main problem with all this is when the Taxpayer files their tax return and claims an FMV deduction and then receives the from 8282 (could be years later) giving the sales information.  As the instructions to Form 8383 state [As a result of the sale by the donee, the donor's contribution deduction may be limited or part of the prior year contribution deduction may have to be recaptured. See Pub. 526]