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This is the situation. My parents have a LOT of clothing that my mom has held onto since before I was ever born, and I'm 30. They also own a small business (unincorporated) and both of my parents are retired. The question I have is that if I were to talk them into donating these clothes and possibly even doing some of the donations myself (there truly are that many) I've seen pricing lists that would put the deduction up into the thousands (again, there truly are that many). Now if they were to sale this stuff at a garage sale then the haul would possibly be a couple of hundred dollars. Anyone have any suggestions on this? I appreciate your thoughts!

Your dilemma is the typical one. Do you take the easy (profitable) way out or do you report correctly? The rules state that your parents are entitled to deduct the FMV of the clothes that they donate. The FMV is what they could sell the clothes for, not a generic price list prepared by Salvation Army (or another organization). The SA list (and others) are general guidelines as to what certain items may sell for in their stores. So if all they could get at a garage sale is "a couple of hundred dollars," that's a better approximation of what they should claim as a charitable deduction (should they donate the clothes).

You should also be aware of some other issues:

First, the charitable contribution will only be of use to them if they already itemize (or have enough deductions with the charitable contribution to itemize).

Second, if the value of the donated clothing exceeds $500, you have additional paperwork to file with the IRS, Form 8283, Noncash Charitable Contributions.

Third, if the value of the donated clothing exceeds $5000, in addition to the 8283, you need to get an independent appraisal.

Finally, if they sell the clothing, the cash they receive will be tax free (assuming that they sell the clothes for less than they originally paid for them).

Hope this helps. If you have further questions, please ask.

Ira
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