Over a specific value the donor needs to have an independent appraisal stating the value.

The good source of information about this is the IRS Publication 526. The current version is for preparing 2014 taxes, but it should be getting updated soon. You will find the information under the section "Records to Keep" starting on page 17. Both cash and noncash contributions are covered.

The donor needs to get an appraisal by a qualified third party, who is not part of the transaction. The IRS sets out rules on who is qualified to make such an appraisal.

Alan said: "I've found most scrap dealers buy from me by the gross ton but sell to me by the net ton. "

That's why, in over 40 years, I have never met a destitute scrap dealer.

Howard P.

The comments so far mostly apply to the rules for an individual as a donor.
I am not an accountant, but from my business experience I think it likely that:
If the donor is a C corporation, and the item has been fully depreciated,
(which might be likely given its age), there may be no tax benefit to the donor.

Therefore, I would be very careful discussing any tax implications of a gift
with a corporate donor, unless you have consulted an accountant.

Often a corporate donor is more interested in the PR from such a donation.
It might be helpful to discuss a PR plan, such as press releases, donation event,
mention of the donation on signage, etc. with the potential donor.

Paul

Not an accountant here either but as the original poster states a town is looking to acquire the unit. I think most here are referencing the rules for a donation to a 501(c)3. I believe it would be different for a private company selling or donating to a government agency.

Generally a donation to the government is tax deductible if it's for a public purpose.


It's to prevent the even less honest tax scam of charities competing with each other to promise inflated valuations to donors. Remember when you saw constant solicitations to donate your automobile? And suddenly those kinda went away? That's because the IRS finally put out some messaging along the lines of "nuh-uh".

I've been approached many times by people who wish to donate something as long as I give them a letter valuing the object at some high figure. Sorry, I can't tell you what its worth, is my reply.

So do IRS tax depreciation schemes end up with the asset having zero value and therefore can't have any resale/donation value?

I have seen machine tools at a scrapyard near me that were busted up upon receipt and when I asked why since they could have been sold to home machinists like me, the business said they were required to destroy them by the former owners. I couldn't understand why worn out mills and lathes that still had value to hobbyists had to be destroyed. I bought a pretty worn out Bridgeport built in the 1960's that I'm sure had been depreciated to zero long ago from a dealer. It is not capable of accuracy over long table travels but is fine for small work.

Steve

The machine tools may have been destroyed to prevent continued use and potential liability claims by subsequent owner/operators.

This gets involved. According to this IRS publication, the value of the locomotive will depend on how Lehigh Cement treated it:

https://www.irs.gov/pub/irs-pdf/p946.pdf

Retired From Service
You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events.

You sell or exchange the property.
You convert the property to personal use.
You abandon the property.
You transfer the property to a supplies or scrap account.
The property is destroyed.

Only Lehigh Cement will know how they treated the locomotive in terms of the IRS.

Either Lehigh Cement told the IRS they abandoned it or transferred it to a scrap account.

Steve

Steve; I've seen that happen right in the parking lot at work.... We had a Reed-Prentice 48" Lathe that was completely refurbished then never used. While it was being refurbished, the company purchased a new lathe so when the R-P came back it sat in the warehouse for the next 4 years... I tried to get it for a local group, only to be told they couldn't donate it or sell it for reuse.. Scrap only! The scrap-man came to pick it up and quickly cut it into 2 pieces right in the parking lot before carting it off!

Tim W.

Unbelievable. What a terrible waste of a fine machine tool. I bet they told the IRS it had been placed in a scrap account and now could only be sold as scrap. There should be some way to prevent that from happening.

Steve

Become the scrapper - or at least befriend them. They want to resell them metal for more than they have to invest in acquiring it, it costs them less to resell it to you by the pound as is than to put time and materials into changing it into chunks first.

I think you will find in the case of machine tools being passed along it is all about liabilities vs. money or taxes. My company used to allow purchases of surplus equipment and materials. About ten years ago corporate deemed the liabilty of injury or harm too great and all metal items must be scrapped. The scrappers are not allowed to sell the items intact either. Dang lawyers. Glad I was able to take advantage of the previous 25 yrs of deals.

Bob D.

Maybe the granddaddy of these agreements was between EMD and Pielet Brothers. Very little that went in through their gates ever came out again in usable form, other than as heavy melt. This was strictly an attempt (a successful one) to suppress the after market in parts or functional locomotives.

The other concern is potential liability. Forty years ago when I worked for the transit authority, there was already an edict that all ladders retired be cut in half lengthwise to prevent further use.

Even further back than that, my father-in-law worked for M&M Mars, of Milky Way fame. Mars used to keep miswrapped but otherwise edible candy bars and donate them to orphanages and the like, until they realized that a certain amount were being misdirected (sold) back into the normal distribution chain, where had the potential to tarnish their reputation. After that, all defective product wen immediately through a shredder, wrappers and all, and was sold as hog feed.