Tag Archives: fair market value

Is There A Connection Between Housing Market Crash and Rising Medical Costs?

As millions of American homeowners know, the housing market crash was fueled by inflated home values and bank loans that were high above the equity or actual value of “underwater” homes. According to Trisha Lotzer, JD., health-care attorney and CEO of Physis, Inc., a similar threat for banks, borrowers and owners of many of the nation’s medical, dental, optometry and veterinary practices must be averted.

Like residential real estate, medical practices may be marketed and sold by brokers. Brokers in the business of selling medical practices commonly charge 7-12% commission. The commission alone can add $80,000 to $2,000,000 to the purchase price, depending on the size of the facility–and drive up the bank note accordingly.

Like real estate agents, the job of the practice broker is to get the seller the highest selling price possible. Unlike real estate agents, however, brokers are often the only ones who value the practices they have for sale–giving them a built in incentive to inflate the value of practices and increase their commission. Ross Landreth, MBA, explains that the problem occurs when a practice is arbitrarily valued, purchased and financed at $1,500,000, but only has an actual fair market value (per USPAP approved valuation standards) of $850,000. This could mean that the practice does not cash-flow at $1,500,00 and that the new purchasers would have to raise the price of services in order to maintain profitability and pay back the bank note. This increase in the cost of health care does not increase the earnings of the practice owners or physicians but is passed along to patients and insurance providers.

Practice brokers often rely on the recent sale price of one practice in a particular speciality or location as the basis for assigning a value for other practices in that area. So, even if the broker resists the temptation to increase the selling price to increase the commission, the inflated value of one practice perpetuates the cycle. Thus, eventually, higher health care costs are necessary in all practices in the region in order to make them profitable enough to enable the owners to pay back the bank loans on the collectively inflated prices.

Changes quietly went into effect this month that may require those applying for SBA loans to submit an independent valuation.

Contact Details: 7150 E Camelback Rd. #444 Scottsdale, AZ 85251
866.517.9998. ross@physisinc.com or trisha@physisinc.com
www.physisinc.com.

What Will My Tax Deduction Be if I Donate My Car?

When a person calls a charity to ask about car donation, they usually ask what their tax deduction will be if they do donate car. The answer is a little complicated. When you donate car to charity the amount you can claim on your taxes depends on two things; the fair market value of your car and what the charity does with the car.

The fair market value of your car is the amount you could sell it for on the day you is not more than the amount you paid for the car; in its present condition; without any repairs.  To determine the fair market value or FMV of your car you can use any of the popular pricing guides to help, including the Kelly Blue Book, NADA Guide or Edmunds Guide. If you are using the Kelly Blue Book or Edmunds Guide, you should start with the private party values and then adjust those values according to the mileage and condition of your car. Do not use the values listed under Retail or Clean Retail to determine the FMV of your car. These are the values for the car if it were purchased from a car dealer and in excellent condition. It is important that you are reasonable in determining which values to use based on the actual condition of your car.  The last thing you want is for the IRS to disallow your tax deduction during an audit because you inflated the FMV of your car.

Here are some general guidelines you can use to help determine the correct selection for the condition of your car;

Excellent Condition or Clean Retail means that the car has never had any body work and has no rust. This is basically “show room” condition. If your car had some body damage at one time, even if that damage was completely repaired, you should not use this category.

Good Condition or Clean Trade-in means the car has some very minor scratches, little or no rust, no major mechanical problems, good tires, etc. If your car has a dent, is rusted or has a significant problem like the transmission slips, the engine knocks, etc. you should not use this category.

Fair Condition or Average Trade-in means that the car is in reasonable running condition has some repairable mechanical problems, damage or rust. Most car donations fall into this category.

Poor Condition or Rough Trade-in means that the car has severe mechanical problems, damage or rust. If your car has a salvage title or flood title you must use this category.

The second thing that determines the amount you can claim for your tax deduction when you donate car is what the charity does with your car donation.  If the charity sells your car as-is, without making any major improvements, your tax deduction depends on the amount the car is sold for.  If the sale price is more than $500, the sale price is the amount you can deduct. In this case, the charity is required to provide you with IRS Form 1098-c. If the sale price is less than $500, you can claim the FMV up to $500.

If the charity sells the car after making major improvements you can claim the FMV as long as it is not more than the amount you paid for the car. In this case the charity has to provide you with a statement that they plan to make those improvements, what those improvements are and that the car will not be sold until after those improvements are made.

If the charity plans on keeping your car and using it for their purposes, you can claim the FMV as long as is not more than the amount you paid for the car. In this case, they have to provide you with a statement of their intent to use the car, how long they intent to use it and certifying that the car will not be sold until the completion of that use.

If the charity intents to donate car to or a needy person or sell it to them for much less that its FMV, you can claim the FMV as long as it is not more than the amount you paid for the car. In this case the charity must provide you with a statement of their intentions and that the gift or sale directly furthers its mission.

Turn Your Car into Cash

If you own a car that you do not need, you will save some money on your taxes and help a very worthwhile cause when you donate your car to charity.  When you donate car, you get a tax deduction that is based on two things; the fair market value of your car and what the charity does with your car donation. If the charity uses your car, gives it to a deserving person or sells it to them at a greatly reduced price, you can claim the fair market value of the car as long as it is not more than what you paid for it. The fair market value is the amount you could sell your car for on the day you donate car and in the condition it was in on that day. If the charity sells your car donation, which is what most of them do, you can claim the larger of $500 or the amount it is sold for.

Many charities only accept vehicles that run, are in decent condition and are less than 10 years old. Cars4Charities does not have those restrictions; they will happily take your car in any condition.  They just ask that you provide a title for the vehicle, have not taken parts off of it, have the tires inflated, and park it in a place where the tow truck can easily get to it.

And, Cars4charities has over 1,000 international, national, state and local charities you can donate car to! With charities like local homeless shelters, food banks along with International and National charities like Aid for Haiti, the America Foundation for the Blind, the Prevent Cancer Foundation, the Asthma & Allergy Foundation, Autism Speaks, the Breast Cancer Research Foundation,  the Brain Trauma Foundation, the Diabetes Research Institute Foundation, the National Association for Down Syndrome, Food for the Poor, Partners in Health, Teach for America, Freedom from Hunger, the LAM Foundation, the National Brain Tumor Society, etc. to choose from, Cars4Charities can satisfy almost everyone’s philanthropic tastes.

The process of car donation at Cars4Charities is quite simple. It is so simple; you do not even have to make a telephone call. You can donate your car at your leisure, any time through their website, http://www.cars4charities.org/. In addition to the convenience, the online option greatly reduces administrative costs, resulting in more money going to the charity you select. It is also better for the environment because it lowers the use of paper and other consumables.

Complete details on how to donate car are available from Cars4Charities at their website http://www.cars4charities.org/ or by calling them toll free at 1-866-448-3487 (GIVE-4-US).

You Will Be Dancing With the Stars When You Donate Your Car

When you donate car you no longer use, want or need to charity, you will feel so good about yourself, it will be like you are dancing with the stars. You will feel very good about helping to support a charity. You will also feel very good about the tax deduction you will get for donating a car.

Your tax deduction depends on what the charity you donate car to does with your car donation. If the charity uses your car for their purposes, gives it to a deserving person or makes major repairs to it, you can claim the fair market value of your car as long as it does not exceed the amount you paid for it. The fair market value is the value of the car on the day you donate it and in the condition you donated it in. If the charity sells your car donation, your tax deduction is limited to the greater of $500 or the amount the charity actually sells it for.

Most car donations need significant repairs. For that reason, most charities do not use them or give them to deserving individuals. The manner in which charities sell donated cars varies. Many auction all car donations, no matter what condition they are in. Cars4Charities is different. Their objective is to maximize the sale price on every car that is donated to them for two very important reasons. First, the tax deduction for the donor depends on the sale price of their car donation. Second, the more money received from the sale of the car donation means more money to the charity.

If you really want to feel good about donating your car to charity, you should look at Cars4Charities. They will get you the best tax deduction possible for your car donation and send the maximum amount to the charity you choose from their extensive list of participating charities.  That list includes International charities like Aid for Haiti, Food for the Poor, Freedom From Hunger, the Fund For Peace, Helen Keller International, Partners in Health, the Smile Train, TropicalClinics, etc., National charities like the American Autoimmune Related Diseases Association, the American Foundation for the Blind, the American Macular Degeneration Foundation, the American Parkinson Disease Association, the Asthma and Allergy Foundation of America, Autism Speaks, the Brain Trauma Foundation, the Breast Cancer Research Foundation, the Cancer Research Institute, the Diabetes Research Institute Foundation, the Juvenile Bipolar Research Foundation, the Lam Foundation, the National Association for Down Syndrome, the National Coalition for the Homeless, the National Council on Alcoholism and Drug Dependence, the Prevent Cancer Foundation, Teach for America, as well as many State and hundreds of local charities like food banks, homeless shelters, and various other fine charities.

For more information on how to donate car, please contact Cars4Charities at http://www.cars4charities.org/ or call them toll free at 1-866-448-3487. They will gladly explain the entire car donation process to you and provide you with prompt and professional service.