J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

14.7 Cars, Clothing, and Other Property Valued Below Cost

If you donate property whose value has declined below your cost, your deduction generally is limited to the fair market value. However, the rules for cars, trucks, boats, and airplanes are more complicated. Strict substantiation requirements apply to prevent donors from claiming inflated deductions for donated vehicles where the charity actually received much less on a sale to raise cash; see below.

If you are planning a donation of stock or other investment or business property worth less than your basis (5.20), consider selling the property and then donating the proceeds. If you donate the property, your deduction is limited to the fair market value and you cannot deduct a loss. If you first sell the property, you can claim a loss on the sale and then claim a charitable contribution on your donation of the sale proceeds; see the Example below.

EXAMPLE

Betty Dunn owns securities that cost $20,000 several years ago but have declined in value to $5,000. A donation of these securities gives a charitable contribution deduction of $5,000. If Betty sold the securities for $5,000, she could claim a long-term capital loss of $15,000. She could then donate the sales proceeds and claim a $5,000 charitable deduction for the cash contribution.

Clothing or household items.

You can claim a deduction for used clothing or household items only if they are in good used condition or better. Household items include furniture or furnishings, ...