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LEGISLATIVE UPDATEThe IRS is authorized to issue anti-abuse rules that may be necessary to preventavoidance of this new body of law, including preventing (1) the circumventionof the reduction of the charitable deduction by embedding or bundling thepatent or similar property as part of a charitable contribution of property thatincludes the patent or similar property; (2) the manipulation of the basis of theproperty to increase the amount of the initial charitable deduction through useof related persons, pass-through entities, or other intermediaries, or through theuse of any provision of law or regulation (including the consolidated return regulations);and (3) a donor from changing the form of the patent or similar propertyto property of a form for which different deduction rules would apply.Contributions of Motor Vehicles, Boats, and Airplanes(Act § 884; book § 9.25)There are new substantiation rules for contributions of motor vehicles, boats, andairplanes – collectively termed qualified vehicles. These new rules (IRC § 170(f)(12))supplant, in cases of contributions of qualified vehicles, the general gift substantiationrules (IRC § 170(f)(8)) where the claimed value of the gift exceeds $500.Pursuant to these new rules, a federal income tax charitable contributiondeduction is not allowed unless the donor substantiates the contribution by acontemporaneous written acknowledgment of the contribution by the doneeorganization and includes the acknowledgement with the donor's income taxreturn reflecting the deduction.The amount of the charitable deduction for a gift of a qualified vehicledepends on the nature of the use of the vehicle by the donee organization. If thecharitable organization sells the vehicle without any “significant intervening useor material improvement” of the vehicle by the organization, the amount of thecharitable deduction may not exceed the gross proceeds received from the sale.The acknowledgement must contain the name and taxpayer identificationnumber of the donor and the vehicle identification number or similar number. Ifthe gift is of a qualified vehicle that was sold by the charity without such use orimprovement, the acknowledgement must also contain a certification that thevehicle was sold in an arm's-length transaction between unrelated parties, a statementas to the gross proceeds from the sale, and a statement that the deductibleamount may not exceed the amount of the gross proceeds. If there is such use orimprovement, the acknowledgement must include a certification as to theintended use or material improvement of the vehicle and the intended duration ofthe use, and a certification that the vehicle will not be transferred in exchange formoney, other property, or services before completion of the use or improvement.There is now a penalty for the furnishing of a false or fraudulent acknowledgement,or an untimely or incomplete acknowledgement, by a charitabledonee to a donor of a qualified vehicle (IRC § 6720). If the vehicle is sold withoutany significant intervening use or material improvement by the donee, the penaltyis the greater of (1) the product of the highest rate of income tax and thesales price stated in the acknowledgement or (2) the gross proceeds from the saleof the vehicle. In the case of an acknowledgement pertaining to any other qualifiedvehicle, the penalty is (1) the product of the highest rate of income tax andthe claimed value of the vehicle or (2) $5,000. xxi