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From: btb@hogpc.UUCP (B.BURGER)
Newsgroups: net.taxes
Subject: re: Double Deductions
Message-ID: <371@hogpc.UUCP>
Date: Sun, 25-Mar-84 15:44:45 EST
Article-I.D.: hogpc.371
Posted: Sun Mar 25 15:44:45 1984
Date-Received: Mon, 26-Mar-84 20:25:05 EST
Lines: 31

> (Paraphrasing) A: It's a double deduction when you give something 
> to charity, deducting the market value but not paying taxes on 
> the capital gains you'd ordinarily be liable for.

> (Paraphrasing again) B: No, I only count one deduction -- at the time
> of donation.

B is literally correct but what A *meant* to say (wow, I'm a mindreader)
is correct:

Of course, there's only one deduction.  But usually (e.g., with
interest on mortgage payments), deductions are for amounts you also
paid.  A deduction isn't the gift from God some people think it is,
just a statement that "you don't have to pay tax on this amount because,
even though you earned it, you didn't *keep* it."

On the other hand, in the example here, the donator is deducting an
amount that he never paid.  All that was paid was the purchase
price, not the market value.  So it's a less "fair" deduction than
most.

Note, though, that the donator would still make out better by
selling the item and keeping the money (100% of the purchase price
and about 80% of the capital gains after taxes) than donating and
deducting (which is equivalent to saving 50% of the total market
value).  The only way it's *financially* worth contributing to
charity under this scheme is by overestimating the market value,
which is illegal although difficult to enforce against.

--Bruce Burger     AT&T-Information Systems     Lincroft, NJ
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