Hopefully some of you have some insight on this. Is there any benefits, to a larger RR corporation, in donating a vintage locomotive to a non-profit over putting up for sale? I know there are many factors that can come into play with something like this. I am curious if there is anything that might help persuade someone in the decision making seat that this may be a better option.

Any help is greatly appreciated!

Tax or financial wise - can't saw. Their account can.

Preserving history - important. Seeing in run - important.

I am not hanging my hat on the preservation argument. For the purpose of this question, I am not going to spend too much time with pushing the preservation side of it. The unit in question is vintage and beyond its useful life in the eyes of its current owner, but could be desirable to many industrial or shortline operations. It only has a local appeal because of how long it has worked in the area. It is, for lack of better words, very familiar to the local railfans, and employees.

Not seemingly high-consideration nowadays, but Public Relations. Donating a locomotive is a great human interest story, and if it's locally significant, shows the company as being a supportive member of the community. This is the kind of thing that is difficult to rationalize on a balance sheet.

Railroads have learned a lot over the last 50 years or so about donating equipment.

Everybody is tickled to death at first. Then the piece begins to weather and gets vandalized. Eventually it's an eyesore. What had been a great PR piece becomes a PR liability as it has the railroad name emblazoned on it.

The recipient than wants, or even expects, the railroad to come in and fix it up, paint it, repair the broken pieces, etc. Big railroads that donated large numbers of locomotives, cabooses, etc. to city parks are only too aware of how this plays out.

Donations to responsible museums are usually much better taken care of.

Unless a locomotive is historically significant ( like being the sole survivor of its class) the owner could have several options, selling it for service elsewhere, donating it or scrapping it. All of those might involve doing some maintenance or repair just to move the loco on its own wheels, and the cost to do the work plus the transportation cost can be expensive. Loading and moving a loco on a flat car can be very costly. Scrap prices are way down now so scrap dealers are bidding very low on items that involve lots of labor to disassemble and sort out the various kinds of metal. Some dealers are capable of bringing in equipment offsite from their home location and cutting up items. That adds to the cost of the job also and the price that they pay for the item will reflect that. Many times when something is donated by a company there are restrictions attached to the donation regarding the disposal or sale of the item and that can be a limiting factor in acceptance of a donation for some organizations. Larger locomotives may not be suitable for service on small railroads that do not have the track that is adequate to support the weight of them and they may be more costly to run and maintain making them less desirable to a small railroad.

Strictly speaking, there are three possible benefits: logistical, financial, and public relations.

Logistical: You get the darned thing out of your way/siding, if that's a problem. You remove an "attractive nuisance." that could dray litigious trespassers or neighbors.

Financial: Only their accountant can tell the potential financial benefit. Possibly the asset value is carried on the books for more than scrap value and can be considered as a tax deduction to a nonprofit, or they know that they can part it out (well, maybe) for more than the $5K the scrapper will give them.

Public relations: a major plus, albeit with its own perils as well. Will someone sue the Podunk & Western because their kid fell off the P&W loco in the park and broke their skull? Will the donation of an old piece of equipment make the company look "old"? Will the fact that they are still using those cars/locos in revenue service make the company look "old-fashioned" or like they're "using museum pieces to run our transit!!!"? (That was a problem with PCCs for a while, as well as some commuter operations using "dog's breakfast" consists of secondhand locos/cars.)

Right now there are two of three reasons to donate covered. Logistics are a non issue. Public relations is obviously there. Could be some good media coverage, if wanted by both parties. The financial side is where I am lost. The fact that the unit in question is a blue carded usable machine and is really only leaving because corporate says it is outdated, may be a big negative. The group interested in it would continue operating it, so no static display, attractive nuisance issues.

There may be a tax benefit.

Altruistics and emotional logic aside..... here's some hard facts.

1) What's it worth to the company as-is? i.e. scrap value? That's often all the company and accountants care about, just saying.

2) IS THE COMPANY MAKING MONEY in the taxable year? Donations are great, but if you don't have a profit to offset with a donation, it's a fairly moot point.

3) Can the item be appraised at a higher market value than the current scrap value? The IRS has some pretty good guidelines for appraisers - I have to follow them - on what's considered to be a comparable sale for appraisal purposes. It's all about locating comparable sales and transactions that meet the satisfaction of the IRS, that's where the real work is.

4) Are you a legitimate donation recipient? Got your IRS nonprofit status ready and clean? Any doubt at all about that?

Now, here's the ideal situation - which we last hit in 2007....

1) High demand for industrial/lease units suddenly evaporating within a 90-day window but transactions available within time guidelines
2) Prior year taxable income that could be offset with a current-year donation
3) Crashing world scrap prices making it less attractive to scrap in the current market.

If you can prove - rationally - that the appraised value is higher than the current scrap value, and the company has earned income to offset with a donation, you can make a pretty solid case. I got several donations to clients when that happened.

In some cases, that may be happening right now. Just saying. There's lots of other pitches you can make, but if you can analyze the appraised market vs. the scrap value and they really don't want to pay taxes.... well, there you go.

Since a donated a locomotive is probably fully depreciated on the company's books, can it also be declared as a tax deduction?

I would assume that if it's fully depreciated, then a donation would render zero tax benefit. However, if the locomotive does have a fair market value (presumably a scrap value), it could be sold at a loss if sold under FMV.

I'm not an accountant, but I believe that even if it is totally depreciated, the donation is still a valid write off at fair market value as determined by an uninvolved third party (IE: the non-profit receiving it cannot provide the value, as they are an interested party according to the IRS).
The donor can set the value, but must be able to provide proof of said value if questioned!
IE, you cannot donate your old jeans to the Salvation Army and declare a $300 donation unless you can document that value.

I believe the topic that needs to be covered is recaptured depreciation. If an item is fully depreciated, there is an IRS rule that handles how the market value, vs. the tax deduction, is calculated, but I've not dealt with that previously. Any accountant know what's involved here?

With scrap prices as low as they are, approx. $50/ton unprepared, another option is just to buy the unit if it has no resale value other than scrap. A 240,000 lb. locomotive could be worth only about $5,400 or less.