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The Tax Man Cometh

Offline Alias300

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Re: The Tax Man Cometh
« Reply #30 on: January 05, 2014, 01:19:44 PM »
They're not buying it, they are only allowing the tax deduction on it. Meaning that if a $100 item is donated you take $100 off your income, you do not take $100 off your tax bill. If your overall taxes are about 15% then the government is giving up $15 not $100.

You are correct.  But have you ever been tested for reading comprehension?

Look at my example.  You missed a major point.

But let's use your example......

$100 item.
Donate.
Write off $100.
Get $15 off owed taxes.  (Assuming 15% tax bracket)

But what did you pay for item?

Say you picked it at garage sale for $10.  You write off $10, not the  FMV of $100.  If so, you'd get $15 off tax bill.  Annnnd.....government is buying your sh*t.  You made $5 profit.

Put this over to storage unit.
If you paid $100 for unit and that was the only thing in it, cool.
But if you paid $100 for unit.  Ten items in unit.  Each item can only have a combined donation value of $100.    You can't say the FMV of ten items combined is $1000, write off donation value of $1000 and get $150 off your tax bill when you only paid $100 for the items.




Re: The Tax Man Cometh
« Reply #31 on: January 05, 2014, 04:38:18 PM »
...Or you can get yourself a Tax ID and FEIN number, both free.. Donate all you want and claim everything as FMV and list  as "business inventory". Your business can be selling on eBay, yard saling, flea marketing, or an actual storefront. No?

Offline Alias300

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Re: The Tax Man Cometh
« Reply #32 on: January 05, 2014, 05:29:00 PM »
I've been reading and It seems you can......but it has to be in inventory for an amount of time.
I don't think you can just clean out unit, put good stuff in store, take stuff your store doesn't sell to donation site and right of FMV.

I haven't got all the way thru the codes.  I'm confused because one says one thing and another seems to contradict it........

Re: The Tax Man Cometh
« Reply #33 on: January 05, 2014, 07:50:53 PM »
I've been reading and It seems you can......but it has to be in inventory for an amount of time.
I don't think you can just clean out unit, put good stuff in store, take stuff your store doesn't sell to donation site and right of FMV.

I haven't got all the way thru the codes.  I'm confused because one says one thing and another seems to contradict it........


Contradiction is what the IRS does best.. I believe that there is no rule stating how long a business has to keep inventory before it can be donated. For items like clothes, I just send it straight to another thrift store if it comes in and I can't, or won't sell it. I get enough clothing in each locker to cycle through, or "cover" the deduction. Another advantage to starting a "business" is that you get 100% FMV as a sole proprietor rather than 15%..

Offline alloro

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Re: The Tax Man Cometh
« Reply #34 on: January 05, 2014, 09:28:14 PM »
You are correct.  But have you ever been tested for reading comprehension?

I comprehend just fine and at least I don't contradict myself in the same line like you did up there. If I'm correct, then I must've comprehended just fine.

But to further the point you're trying to incorrectly make... for items valued at $500 or less it doesn't matter what you paid for the item. It's FMV is $100 and when you donate it you're out the $100 because you no longer have the item to sell. So you are now out the $100 of income it would've brought you when you sold it. If the government were buying the item they would have to pay $100, not the $10 I paid for it.

You seem to have difficulty discerning the difference between the FMV and the cost of an item. Deductions are figured on the FMV, not your cost.

Offline rulesforrebels

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Re: The Tax Man Cometh
« Reply #35 on: January 06, 2014, 11:01:46 AM »
i have to pay taxes quarterly so can't really wait  until the end of the year. this last part of the year was good but bad for taxes. i think we gonna owe about 30k. have the money set aside and fortunately paypal reserves are starting to be released so i can at least pay my taxes. paypal does seem pretty cool though, my rep said if i couldn't pay my taxes give a call and they could release some money prematurely so i could do so

Offline Alias300

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Re: The Tax Man Cometh
« Reply #36 on: January 06, 2014, 11:34:35 AM »
I comprehend just fine and at least I don't contradict myself in the same line like you did up there. If I'm correct, then I must've comprehended just fine.


You were correct in your math example but missed the whole point of my previous post....as in you didn't comprehend it.....whatever.   Your a smart guy from what I see in your post.  Just seem to be a bit stubborn.   If I'm wrong, prove it.   I said from the get go I'm not a professional and could be wrong, just they way I'm reading it....

Anyway, this is what I was emailed from Itsdeductible.

What is fair market value?

The IRS defines fair market value as the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act and both having reasonable knowledge of the relevant facts.

IRS Publication 561
Factors that affect the fair market value of an item include: condition, style, use, and age. ItsDeductible considers these factors together as contributing to an item's value.

**You also need to consider the length of time you have owned an item.**

Items Owned
Deduction Can Be
Less than one year   No more than the original price paid
More than one year   Generally at the fair market value
(Consult IRS publication 526 for certain exceptions.)





Examples of appropriate ways to value item donations:

You donated a pair of men's blue jeans that are in style and in excellent condition. ItsDeductible valued them at $10. However, just six months ago, you paid only $7 for these blue jeans because you bought them on sale. The most you can deduct is $7.

You have a Toastmaster coffee maker that's only six months old, but it is out of style and has significant defects. You should select the "low" value category. Because of recent tax law changes, items in this category are not deductible. Learn more

You find a designer-label leather purse of high value at a garage sale and you buy it for only $20. Fifteen months later, you donate this purse to a charity. Since you only used it a few times, it still looks the same as the day you bought it at the garage sale. You can value this item as "high" in ItsDeductible.
Examples of Improper Valuing

You donate a woman's coat of high value that you originally bought for $55. In ItsDeductible, you describe it as a women's designer coat, which has a value of $165. If this coat is not a designer coat and you only paid $55 for it to begin with, it is your responsibility to assign the proper description and value.

You donate a belt sander that you've only had a few months, but it is broken. Since the sander is broken, you must describe it as "poor" quality even though it is practically new. Broken items that cannot easily be fixed will usually have little or no value. Because of recent tax law changes, items in this category are not deductible. Learn more

You buy a man's suit at a garage sale for $5. One month later, you donate that suit to your local Salvation Army. The suit is in style and made of high quality material, so you select the "high" value in ItsDeductible. ***Since you have owned this property for less than one year, you are responsible to make sure you deduct only what you paid for it, instead of using the fair market value listed in ItsDeductible which may be higher.****
................

So that's where my confusion was.    I couldn't figure out why some parts of code say FMV and other parts say cost.   So maybe I'm reading this wrong too but my above post is correct.   You can't just go buy a bunch of inventory on the cheap and then donate it at FMV.  You need to hold it in inventory for a year. 



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