Broker Check

June 30, 2004

Summer Jobs For Children

                are ideal opportunities to do some financial planning.  You can contribute up to $3,000, but not more than the child’s earnings, to a ROTH IRA.  The ROTH can turn into a nice nest egg for the child.  For example, a 16 year old with $3,000 into a ROTH that grows at 7% per year will have $82,000 at age 65 and $115,000 at age 70.   Amounts can be withdrawn free of tax to pay for the child’s education or the purchase of a first house. Kiplinger Tax Letter 7/2/04

Not Banned in Boston

          Same  sex spouses  cannot  file  jointly  on  federal  tax  returns,  so says the IRS.  For federal tax purposes, only a man and woman united in marriage can file a joint tax return.  But in  Massachusetts,  couples will  be  able  to file  jointly on their state tax return since the state recognizes same sex marriages. Kiplinger Tax Letter 7/2/04

IRS Revises Auto Donation Rules

          The  Internal  Revenue  Service  has  posted two new publications on its website, a donor’s guide to car donations, and a charity’s guide to car donations.
            The guide for donors says that would be donors of automobiles should
                        1.      Check out the charity
                        2.      Check the value of the vehicle being donated, and
                        3.      Check their responsibilities as a donor

            This means that if the donor wants to claim a deduction for the donation of a car, he should make certain the charity is a qualified organization.  Otherwise, the donation is not tax deductible.       
            The deduction is limited to the fair market value of the car i.e. the price that a willing buyer would pay and a willing seller would accept for the cars, when neither party is compelled to buy or sell, and both parties have reasonable knowledge of the facts.  According to the IRS, some charities claim that donors can, in all cases, deduct the full value of their vehicle as found in a used car guide, such as “blue book” A used car guide may be a good starting point to value a car, but the IRS says the fair market value may be substantially less than blue book.
           Blue book value is normally based on a vehicle in reasonably good operating order and without significant damage to the body.  If a vehicle needs extensive repairs, its value may be substantially less that blue book.
           We want you to be aware that blue book value is not the same as Kelley Blue Book.  Kelley Blue Book is the name of a company.  Blue book is the wholesale price a dealer will pay as opposed to the red book which is the retail price a dealer will charge.  Kelley has both prices and a third which is a party to party negotiated price which is somewhere between the other two prices. 
           The IRS is stating you cannot solely rely upon the paperwork given by the charity.  Additionally, value of over $5,000 needs a written appraisal from a qualified appraiser and a completed Section B of Form 8283, which requires the signature of an authorized official of the charity.  
           Pending legislation (the House passed a version of the 2004 JOBS Act) would retroactively change the rules for donations made after June 3, 2004 to bar a charitable contribution deduction for contributions of cars, boats, or aircraft valued at $250 or more unless the donor obtained a qualified appraisal of the property on or before the date of the contribution.    

            We suggest you call us before donating a vehicle if you have any questions. Internal Revenue Service Release 2004-84

            If you have any questions about the foregoing or any other financial matters, please call us.  If you want to read more, visit the AOHL Newsletter Archives at

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