I don't have anything to do with the Locomotive #35 Committee, nor do I represent their interests. This outfit owns and is preserving the LIRR G5s that handed it's train over to RS3 #1555, as well as the two coaches involved, in October of 1955. Since the RRMusLI owns the other G5 (#39) and the RS3 #1556, and the coaches that were used in the handover,it would make a perfect relationship. Where else in the United States would you find an event like that captured in it's entirety? I'm betting that if the RS3 can be readied for transport and the fees can be covered, the Friends of #35 would be equal to the challenge. At least make the contact. It's good for you, good for them, good for the engine at stake.


glueck@maine.edu

Couldn't agree more that all cases are different. Mr. Jacobson of Ohio Central, for example, is a better custodian of his engines than many nonprofits are of theirs.

The fly in the ointment in this case is that the RS-3 is currently owned by a museum. The museum exists as a 501(c)3 public charity to "serve a public good." It can transfer property to another 501(c)3 easily becuase both organizations are public charities.

It cannot give the engine to a private citizen for less than full scrap value, becuase that would represent transferring a pieice of property held for the public trust out of the public trust and into private ownership without full market value having been returned to serve the public trust. If charites of all kinds could do this, they would be very easy for unscrupulous people to loot and defraud. So, the regs say they can't as a general rule. The Board of Directors of the museum could be held liable for attempting such a non-fair-market value transfer from public to private ownership.

It may or may not make perfect sense for every individual artifact. But in the aggregate its a sensible distinction, and anyway its the law and the legal regs.

eledbetter@rypn.org

Folks, reads the text of the "offer" carefully.........

The loco is LOCATED AT a railroad museum, and WAS ACQUIRED FROM a rail museum, BUT is not currently *owned by* a museum.

Basically, it's owned by an individual. An individual can demand it go to a nonprofit, sell for cash, or demand that the buyer sing "Waltzing Matilda" while standing on his head. It's a free country, the Department of Homeland Insecurity notwithstanding.

Now, perhaps the sale of the loco by the Museum required a condition that the loco only be transferred to a non-profit. But for the most part, all of this discussion is moot.

LNER4472-NOSPAM-@bcpl.net

Did this locomotive get resold recently? If yes, to whom?

Sometimes private owners have their own set of problems. Maybe they have their equipment at a location get mad go home and leave their “toys” behind. They sit there and start to look worse and worse and there is no practical way to move them. I some cases perfectly good equipment doesn’t get used or preserved, just one step closer to the “S” word. Private owners have a track record of both good and bad outcomes. Not just 501C3’s . The argument can be made pro and con for each method of preservation.

The museum exists as a 501(c)3 public charity to "serve a public good." It can transfer property to another 501(c)3 easily becuase both organizations are public charities.

It cannot give the engine to a private citizen for less than full scrap value, becuase that would represent transferring a pieice of property held for the public trust out of the public trust and into private ownership without full market value having been returned to serve the public trust.

I’m sorry, but this statement is wrong on multiple counts. There is nothing in the Internal Revenue Code to require that individual assets be disposed of to disinterested third parties, at any minimum price and generally any applicable state corporate fiduciary requirements would require that assets be sold at fair market value, not scrap price. The simple fact is that if the locomotive can be described as “ partially disassembled, laid out in a warehouse, and then visited by a hurricane? If memory serves me, the building was destroyed, but the locomotive parts remained there, only scrambled” then it’s not a piece of property, its refuse.

Last I checked, YOU PAY to have refuse removed, so giving it to a private party willing to collect and remove it for would be a pretty good bargain.

What Erik has confused is three charitable organization requirements: The first is the requirement that the assets of an organization must be permanently dedicated to an exempt purpose. The second is prohibited inurement e.g., not be organized or operated for the benefit of private interests. The third is that an organization not engaged in “excess benefit transactions”.
1.) Organizational Test - Internal Revenue Code Section 501(c)(3)
This means that should an organization dissolve, its assets must be distributed for an exempt purpose described in section 501(c)(3), or to the federal government or to a state or local government for a public purpose. To establish that an organization's assets will be permanently dedicated to an exempt purpose, the organizing document should contain a provision insuring their distribution for an exempt purpose in the event of dissolution.

Note: this only applies to the dissolution of the organization.

http://www.irs.gov/charities/charitable/article/0,,id=175419,00.html

Note: a disqualified person is defined in code section
2.) Inurement/Private Benefit - Charitable Organizations
A section 501(c)(3) organization must not be organized or operated for the benefit of private interests, such as the creator or the creator's family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests. No part of the net earnings of a section 501(c)(3) organization may inure to the benefit of any private shareholder or individual. A private shareholder or individual is a person having a personal and private interest in the activities of the organization.
http://www.irs.gov/charities/charitable/article/0,,id=123297,00.html
Note: applies only to specific individuals, not any private individual

3.) Intermediate Sanctions - Excess Benefit Transactions
An excess benefit transaction is a transaction in which an economic benefit is provided by an applicable tax-exempt organization, directly or indirectly, to or for the use of a disqualified person, and the value of the economic benefit provided by the organization exceeds the value of the consideration received by the organization.

http://www.irs.gov/charities/charitable/article/0,,id=123303,00.html
Disqualified Person
A disqualified person is any person who was in a position to exercise substantial influence over the affairs of the applicable tax-exempt organization at any time during the lookback period. It is not necessary that the person actually exercise substantial influence, only that the person be in a position to do so.
For this purpose, donors and donor advisors with respect to a donor advised fund are treated as disqualified persons with respect to transactions with the fund.
http://www.irs.gov/charities/charitable/article/0,,id=154667,00.html
Excise Tax on Excess Benefit Transactions.
Section 4958 imposes an excise tax on excess benefit transactions between a disqualified person and an applicable tax-exempt organization. The disqualified person who benefits from an excess benefit transaction is liable for the excise tax. An organization manager may also be liable for an excise tax on the excess benefit transaction.
These taxes are reported on Form 4720, Return of Certain Excise Taxes on Charities and Other Persons Under Chapters 41 and 42 of the Internal Revenue Code.

http://www.irs.gov/charities/charitable/article/0,,id=123298,00.html

Note: excess benefit transactions apply only to “disqualified persons” and are correctable by the disqualified person by payment of a tax and restoration of the difference of the transaction price and the fair market value.

That having been said, I’d really hate to see an organization tie themselves up in knots trying to get (and determine) scrap value because an unqualified person posts something on the internet. Any organization in this or a similar situation should consult an attorney, certified public accountant or an enrolled agent in order to obtain reliable tax advice. That having been said, I am “Circular 230” qualified.

folks,

I too am a LIRR fan when it comes to steam locomotives. I think it is ironic that after not having a railroad museum for the whole 120 miles we now have three of them (one organization has two sites.

The point I want to make is that the 501 (c) non-profit organization is expected to last beyond one lifetime.

So many collections noteabally richard Jenson' steam lovomotives were destroyed because the owner did not leave instructions about what to do with/care for the collection.

It is too bad but spouses of rail fans/ collectors are often jelous ofoall that stuff around the house or garage. that their family member has been spending time with. Family members are often not the best people to decide what to do with that stuff; that why we have appraisors in the antiques field.
Two recent examples come to mind a family member was going to throuw out a collection of 50,000 post cards which instead werre appraised and given to a museum. The estate got a nice write off and many examples of traction images went to the museum.

A maritime painting was appraised and "that old thing" was sold at auction instead of being given to the Goodwill. It put a nice chuck of money into an estate.

Yes the educational non-profits are going to out live a collector. And they are a legal and financial method of seeing that the things you have collected for a lifetime are cared for after you leave the scene.

Ted Miles