Do I deduct the value or the $$ cost to purchase

[sahran]

Paid $3000 to purchase home contents from estate to donate to charity, do I Deduct the value of the donated items (2 - 18 foot truck loads) or can I take the $3000 as cash donation. thx

[Opus 17 · Accepted solution]

Assuming there aren't any "special" items like collectibles that are worth more than you paid, then the value of your donation is limited to the fair market values of the items or what you paid for them, whichever is less.

[If you have items that you think are worth more than what you paid, special rules apply.  In most cases the deduction is still limited to what you paid.  You can sometimes claim the higher value but only if you hold the items for more than one year and then donate them in a specific way.]

You need to report this as an item donation, because the rules for item donations are different than for money donations.  But you don't need to list each individual item.  You can create a custom listing called something like "estate sale contents" and use the $3000 you paid as both the cost basis and the fair market value.

If audited, you will need some reasonable proof of the donation and the value and/or what you paid.  Since you donated the entire lot and will be claiming your purchase price, your receipt from the estate sale, some pictures, and a letter of acknowledgment from the charity should be sufficient.  You should not need a detailed inventory of each item with a separate valuation.  (Make sure you get an acknowledgement letter that is reasonably specific "thank you for the donation of 2 truckloads from the estate sale of Mrs. Smith" rather than a generic blank form that would be the same form given to someone who dropped off a t-shirt.)

[Hal_Al]

The rule is: you deduct the lesser of Fair Market Value (FMV) or your cost basis ($3000 in your case).  

In most cases, when you buy something for the specific purpose of donation, those two amounts are the same.

[Anonymous]

not quite correct.    it would seem that this property was held less than 1 year.  as a result, it is what the IRS would deem ordinary income property.  ordinary income property are items that if sold at FMV would produce ordinary income or short-term capital gain.   the deductible amount is FairMarket Value less the amount that would be ordinary income or short-term capital gain if the property were sold.    say there was an antique in the lot that would place the FMV at $5,000.  selling at this price would produce a $2,000 STCG.  thus the $5,000 would have to be reduced by the $2,000 resulting in a $3,000 charitable deduction. 

[Opus 17]

[edited]

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[sahran]

Thanks to all