Part 1 Itemized Deductions and the QBI Deduction question: Hal deduct

Part 1Itemized Deductions and the QBI Deduction

Hal donated his car, worth $4,000, to a charity that sold it at auction for $2,600 without using it. What can Hal deduct?

A $4,000, the car's fair market value
B $2,600, the gross proceeds shown on Form 1098-C
C The car's original cost
D $500, the most allowed without a written appraisal

Show the answer and explanation

Answer: B. $2,600, the gross proceeds shown on Form 1098-C

When a donated vehicle worth more than $500 is sold by the charity without significant intervening use or material improvement, the deduction is limited to the gross proceeds from the sale, reported to the donor on Form 1098-C, which must be attached. Fair market value applies only in exceptions such as significant charitable use. Source: IRC 170(f)(12); Pub. 4303; Pub. 526 (2025), Cars, Boats, and Airplanes. Tax year: 2025 (law as of 31 Dec 2025).

Common mistake

Deducting book value when the charity sold the car.

Practice more Part 1 Itemized Deductions and the QBI Deduction questions

Exam-style questions with worked answers, then full timed mocks. Free to start.

Start practicing →

Study note: Itemized Deductions and the QBI Deduction Part 1practice questions & mock exams

Related Part 1 practice questions

In 2025 Amy took a $40,000 home equity loan on her main home and used it to pay off credit cards. Her first mortgage is $200,000. Is the home equity interest deductible?Leo paid 2 points ($6,000) to refinance the mortgage on his main home in 2025 to get a lower rate. The loan has a 30-year term. How are the points treated?Dana is single and pays all the costs of her own home. Her widowed mother lives all year in a nursing home, and Dana pays more than half of that cost. Her mother's only income is $4,100 of interest. What is Dana's best 2025 filing status?

Build a daily practice habit — a few exam-style questions a day, with worked answers. Free to start.

Start practicing →

Original study material mapped to the public IRS SEE content outlines; not a real exam question.Not affiliated with or endorsed by the IRS or PSI. Verify figures and rules against current guidance before relying on them.