Posted on 10/04/2004 7:45:22 AM PDT by John Jorsett
OTAY MESA, Calif. -- Early last year, Peggy Saul donated her 1991 Chevy Cavalier with 194,000 miles on the clock to Father Joe's Village, a charity that runs homeless shelters in San Diego. The 55-year-old family therapist received a $1,500 deduction toward her next tax bill.
Father Joe's Village then shipped the red two-door to an auction it runs here, where it sold for $350. Within a few days, the Chevy was in the hands of a Tijuana-based smuggling organization. Ms. Saul's car was impounded by federal agents when they discovered an Iranian man trying to enter the country hidden in the trunk. The Iranian said he agreed to pay smugglers $2,000. The Iranian was deported; the alleged smugglers were fingerprinted and, as is typical at overworked border crossings, released.
"I thought when I donated the car, they were going to fix it up and sell it for a profit to help pay for their programs," says Ms. Saul, who lives in Manteca, Calif. "I feel betrayed."
Her Chevy traveled along an improbable network connecting charities in the western U.S. to auction lots on the Mexico border and the smugglers who buy from them. Smugglers used to steal cars to ferry their goods across the border, but in the wake of a post-9/11 crackdown at border crossings, they're increasingly buying cheap charity giveaways because they arouse less suspicion. The result: an odd channel of commerce shaped by philanthropy, law enforcement and immigration.
(Excerpt) Read more at online.wsj.com ...
Your heart was in the right place.
Father Joe was the 'junior priest' at Our Lady of Grace in El Cajon when I was a kid. All his 'shot comings' are over looked becuase he brings in bucks.
Looking at the excerpted poriton, it does not look like the charity was actually involved with the smuggling in any way. Rather the charity just auctioned off the car to whomever wanted to buy it, no questions asked. The buyer then went on to break the law. You really can't blame the charity for what happens with the car after it gets out of their hands. They were just selling the car a the market rate.
A far more interesting story (IMHO) is the fact that millions of people are taking far more than the market value for the car as a deduction of their tax return. The scam is so open and blatant, it's amazing that it is allowed to go on. The radio advertisements even say that the deduction is worth more than you could get for the car if you sold it yourself. For this statement to be true, if you are in the 30% bracket for state and local taxes, you have to claim a deduction at more than three times what you could get if you sold the car yourself. The example in the excerpt follows this pattern, with the car selling for $350, while the donor deducted over four times that amount.
It would be trivially easy for the charity to report back to the donor the actual selling price, which the donor could then use to figure his taxes. But that would eliminate the primary motivation of the donor, which is to scam the tax man. If the donor reported the actual market value, he would lose money on the transaction, because the tax savings would be only 30% or less the actual value of the car.
The fact that these programs exist at all means that there are charities willing to abuse their tax-exempt status and the taxing authorities are looking the other way. Fraud is the engine that makes this train run.
Oh, puleez...
You are allowed to deduct the fair market value for the car. If you actually did this, you would do much better by actually selling the car yourself for the fair market value, and putting the money directly in your pocket. What is the motivation of the donor, if not to report and inflated fair market value in order to inflate his deduction?
And don't tell me that the donor is just trying to help poor people, or blind puppies, or whatever. If the donor really wanted to help blind puppies, he could sell the car himself and give the money to the charity directly, and take the same deduction for the sale price of the car.
So to answer your questions, it is not following the legal procedure to report an inflated value on your taxes. Doing so is fraud. What the charity sells the car for is the market value of the car, particularly if they are doing so in a well publicized public auction. So if the donor reports a value significantly greater than that, it is fraud. If this happens over and over again with all the donors to a certain charity, it is a pattern of fraud.
Oh, puleez...
You are allowed to deduct the fair market value for the car. If you actually did this, you would do much better by actually selling the car yourself for the fair market value, and putting the money directly in your pocket. What is the motivation of the donor, if not to report and inflated fair market value in order to inflate his deduction?
And don't tell me that the donor is just trying to help poor people, or blind puppies, or whatever. If the donor really wanted to help blind puppies, he could sell the car himself and give the money to the charity directly, and take the same deduction for the sale price of the car.
So to answer your questions, it is not following the legal procedure to report an inflated value on your taxes. Doing so is fraud. What the charity sells the car for is the market value of the car, particularly if they are doing so in a well publicized public auction. So if the donor reports a value significantly greater than that, it is fraud. If this happens over and over again with all the donors to a certain charity, it is a pattern of fraud.
Sorry for the double post. Things are working really strange since last Friday...
When the discussion turns to a national sales tax, I bail.
I mean, what's the point?
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