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<<Right. Publication 526 ("Charitable Contributions") states: "Fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts."

So this means you should only claim a deduction for an item for what you could have sold it for, right?>>

Right...that is generally the FMV of the asset...what a willing buyer/seller would pay.

<<I think I read somewhere (Pub 526 again?) that you only get in trouble (that is, pay a penalty) if you claim 200% or more of what the item is really worth. Is that right?>>

There is a penalty for overvaluation. I don't know exactly the amount of the overvaluation (but I think that you're right with the 200% figure). But that wasn't what I was trying to warn against.

<< I'm not at all saying anyone should try to claim twice what an item is worth to get a better deduction . . . but what if you try to value something fairly and the IRS calls you on it? Unless you really missed the mark there wouldn't be a penalty, right?>> penalty whatsoever (unless you are WAY off the mark and over the 200% limitations). But the original question here was: what would be better. Sell for $750 or donate for $1,200. The numbers indicate that a donation for $1,200 would work best from a dollar and cents standpoint. But if the IRS gets involved and determines that the true FMV is $750, THEN the taxpayer would have been better off selling the car. I'm not as concerned so much about any penalties. Just the fact that somebody was going to use two different values: one for the sale of the vehicle, and one for the donation. It just can't be.

And, as somebody else mentioned, the dollars involved are so small that it's really not a big deal. But...I didn't want ANYBODY to walk away from the discussion thinking that you could value (and then donate) a vehicle based upon some whim, bearing no relationship to the TRUE FMV of the vehicle. There is only ONE FMV for anything.

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