8067 / How is the fair market value of a gift of a qualified vehicle determined?

Fair Market Value

A donor claiming a deduction for the fair market value of a qualified vehicle must be able to substantiate the “fair market value.” Fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and each having reasonable knowledge of relevant facts.¹

A reasonable method of determining the fair market value of a qualified vehicle is by reference to an established used vehicle pricing guide. Many factors must be taken into account when using a used vehicle pricing guide to determine fair market value. A used vehicle pricing guide establishes the fair market value of a particular vehicle only if the guide lists a sales price for a vehicle that is: the same make, model, and year; and sold in the same area, in the same condition, with the same or substantially similar options or accessories, and with the same or substantially similar warranties or guarantees as the vehicle in question.²

Treasury has clarified that the dealer retail value listed in a used vehicle pricing guide for a particular vehicle is not an acceptable measure of fair market value of a similar vehicle. The regulations will clarify that for contributions made after June 3, 2005 and before the date regulations become effective, an acceptable measure of the fair market value of a vehicle is an amount that does not exceed the price listed in a used vehicle pricing guide for a private party sale of a similar vehicle. The regulations limiting the fair market value of a vehicle to an amount that does not exceed the private party sale price will apply to contributions of vehicles made after June 3, 2005. In addition, Treasury will consider whether other values (e.g., the dealer trade-in value) are appropriate measures of the fair market value of a vehicle (for purposes of IRC Section 170). Any regulations limiting the fair market value of a vehicle to an amount less than the private party sale value will not apply to contributions made prior to the date that regulations to that effect become effective.³

Qualified Appraisal

A “qualified appraisal” is required for a deduction in excess of $5,000 for a qualified vehicle if the deduction is not limited to gross proceeds from the sale of the vehicle.⁴ For the explanation of what constitutes a “qualified appraisal,” see Q 8058 (“Contributions Exceeding $5,000”).⁵