| Selling gear, ethical issue? [message #324887] |
Wed, 21 May 2008 13:47  |
 Patrick Tracy
Messages: 1235
Registered: February 2006
Location: Boulder, CO |
Has No Life |
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I have a piece of equipment up for sale on the local Craigslist. One of the responses I got was from a school PTA representative offering a lowball amount and a donation receipt for more than the item is worth for my "tax write off" purposes. Aside from whether this is a good deal for me from a tax perspective or otherwise, is there any ethical problem? The whole thing feels a bit uncomfortable to me and some input from all you smart folks might give me some clarity. I don't plan on accepting the offer because I just want the cash, but more information would help before I respond.
http://home.earthlink.net/~patrickgtracy
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| Re: Selling gear, ethical issue? [message #324920 is a reply to message #324893 ] |
Wed, 21 May 2008 15:39  |
Al Limberg
Messages: 1215
Registered: April 2004
Location: Saginaw, MI |
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Unfortunately (or maybe fortunately) the OP mentioned the call was from the local PTA, a non-governmental volunteer organization - not quite as bad as the local school system itself trying to 'play' their tax free status. I'd pass in a hurry, particularly considering the small percentage you would recover via the donation route and the year long wait to get it. I'd probably just tell the buyer that had he been up front, I would probably have been willing to reduce the price or just flat out donate the item in question, but since I found his approach both unethical and offensive, that would now be out of the question.
?;o)
Al
Some people are like a Slinky.....not really good for anything, but you still can't help but smile when you see one tumble down the stairs.
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| Re: Selling gear, ethical issue? [message #324941 is a reply to message #324887 ] |
Wed, 21 May 2008 16:55 |
Patrick Tracy
Messages: 1235
Registered: February 2006
Location: Boulder, CO |
Has No Life |
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Okay, that makes three responses supporting my instincts about the offer. I'm definitely passing on it but am still deciding how to word a reply or whether to bother replying at all. Sometimes less is more.
http://home.earthlink.net/~patrickgtracy
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| Re: Selling gear, ethical issue? [message #324954 is a reply to message #324941 ] |
Wed, 21 May 2008 17:27 |
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Karl Winkler
Messages: 298
Registered: August 2004
Location: New Mexico |
Has No Life |
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I guess it would depend on my mood at the time as to whether or not I would reply. But if I did reply, it would be something like:
"Here is my minimum price: $XXX.XX
And there is no need for the receipt you provide me to be anything other than the actual amount at which I've sold you the item."
You probably won't hear back, but at least your hands and conscience are clean. Who knows, maybe they'll go for it.
-Karl
[Updated on: Wed, 21 May 2008 17:27]
Karl Winkler
Lectrosonics, Inc
http://www.lectrosonics.com
http://www.karlwinkler.com
http://www.giovanniquartet.com
http://www.sandiastrings.com
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| Re: Selling gear, ethical issue? [message #324975 is a reply to message #324887 ] |
Wed, 21 May 2008 18:20 |
Patrick Tracy
Messages: 1235
Registered: February 2006
Location: Boulder, CO |
Has No Life |
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I declined the offer stating my terms. The amount of the receipt offered was not so far above market value that it would be considered unequivocally unreasonable, so I won't bother opening up any worm-filled cans over it.
http://home.earthlink.net/~patrickgtracy
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| Re: Selling gear, ethical issue? [message #325064 is a reply to message #325048 ] |
Wed, 21 May 2008 23:13 |
Alex Connell
Messages: 184
Registered: April 2007
Location: Cigarette City, NC |
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Bingo. I think you'd be ok taking a deduction for the difference between the Fair Market Value of the item and the amount you received for it. (Assuming the amount they offered you is close to the Fair Market Value, which for many items in this industry is a somewhat illusory number.)
Either way, you'd receive the cash, and then the difference could reasonably be characterized as a donation to the PTA, the amount of which would then be properly deductible to either you or your business, depending on how you have things setup. Obviously, as a deduction and not a credit, this would only have the effect of reducing your Adjusted Gross Income, so the benefit you would receive for the excess would only be a percentage of the final amount as it effects your overall tax liability (for example, if the excess is $100, and you are in an overall 35% tax bracket, then you will receive a $35 tax benefit.)
It's not necessarily unethical, unless, of course, you claim an absurdly large amount of tax deduction for that particular item.
Also, important to consider in this situation, would be the fact that the equipment in your hands is likely being characterized as a capital asset. As a piece of equipment that you expect to produce income for a period of years, you've likely depreciated all or some of the value of the item. This depreciation also has the effect of reducing your tax basis in the item. For example, if you purchased the item for $700, and have held it for 5 years, for "other equipment" you should have depreciated the item at a rate of $100 a year (assuming you did not accelerate the depreciation under section 179.) Each year, your basis in the item (which was originally $700) would be decreased by $100. Any amount received for the sale of that asset in excess of the current basis would expose you to capital gains tax liability. Obviously that is another thing that ought to be considered as well in case of an audit.
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| Re: Selling gear, ethical issue? [message #325173 is a reply to message #324887 ] |
Thu, 22 May 2008 09:58 |
Erik Jerde
Messages: 195
Registered: May 2004 |
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My experience donating audio gear to 501.3(c) orgs is that they will receipt you for goods recieved, but it's your responsibility to do the valuation on the gear. After all you are responsible for the accuracy of your tax report, so if you put down a value of $500 for something only worth $250 and get caught then it's your ass on the line. Even more so in a case like this where you obviously know better - and the IRS would be able to figure that out too.
Keep in mind also that a charitable donation reduces your taxable income, so if you donate $200 and are in the 20% bracket then it would only reduce your actual tax owed by $40, not $200. That's the difference between a deduction and a credit.
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