Non-Cash Charitable Contribution - FMV retail or Cost Basis

[jasdlm]

Client bought new toy from a dealer in December at $1.  Retail price of the Toy was $9.  Client wants to deduct $9 X number of toys purchased (donated to toys for tots for Christmas).  Dealer told him deduction on tax return would be worth more than what he paid for the toys.  Client wants to claim $4,000 charitable deduction.  I think deduction is what he actually paid.  Both purchase and donation occurred in December.

I have checked the IRS publication, and I think I'm right, but Client feels certain that he is entitled to deduct FMS.

Eager to hear your thoughts.  I'm okay with being wrong on this deal.

[JohnH]

What does the client not understand about "lower of cost or FMV"?  

[Lion EA]

Lower of cost or FMV at donation.  Different rules for appreciated property.  And, maybe for inventory; but it doesn't sound like this was inventory in the hands of your client,.

[Terry D EA]

Lower of cost or FMV at time of donation.

[JohnH]

I got the answer to my question.

"It's hard for a man to understand something when the value of his tax deduction depends upon his not understanding it "

[DANRVAN]

8 hours ago, jasdlm said:

 Dealer told him deduction on tax return would be worth more than what he paid for the toys.  

Dealers and salesmen are such a great source of tax advice.

[Pacun]

Give him the donation and report the gain. Do it on Sch C so he feels the SE pain.

FMV or cost, whichever is lower is the rule.

[Max W]

Funny, how people will believe someone who knows nothing about taxes -"dealer" - than they will a tax professional.

The dealer may have even known this, but sucked the client in with a promise of something for nothing, or nearly nothing.

The client should have asked himself why $9 items were being sold for a dollar.  I'm sure the dealer was happy to get a dollar for something that wasn't selling.

Greed causes people to make bad decisions.