The Monterey Car Week auctions concluded a few days ago with sales of some of the world’s most valuable automobiles. The most talked about sale was a one-off of Ferrari’s first-ever electric vehicle, the Luce, code named “Chassis 0.” The Luce, which has an MSRP of $640,000, was not well received by the public as they expected Ferrari not to stray from internal combustion engines.
While the custom-made Luce was estimated to sell for $1.1 million by the auction house RM Sotheby’s, the winning bid ended up being $40 million. All the sale proceeds would go to a 501(c)(3) charity, specifically the Ferrari Foundation.
To put that $40 million into perspective, the legendary McLaren F1 — considered to be one of the greatest sports cars of the 20th century — sold at the same auction for more than $34.6 million. This model is notable for being owned for more than two decades by Pink Floyd drummer and noted collector Nick Mason.
So who paid this astronomical amount? It was Herbert “Herbie” Wertheim, a self-made billionaire inventor, investor, and philanthropist. Wertheim built his fortune through Brain Power Inc. and decades of stock market investing. He is also known for pioneering ultraviolet-light-absorbing technology for eyeglass lenses.
Wertheim also purchased a one-of-one Ferrari Daytona SP3 Tailor Made for $26 million at RM Sotheby’s Monterey auction in 2025. That car was likewise sold for the benefit of The Ferrari Foundation.
Earlier this year, Wertheim also paid $2 million at a charity event for a private visit with President Donald Trump at the White House. The proceeds benefited educational scholarships for children of Palm Beach police officers and firefighters.
There was speculation and numerous conspiracy theories as to why Wertheim would pay so much for a car that had an MSRP of $640,000. Many thought that it was a way to get into Ferrari’s good graces and get an allocation for one of their limited-edition supercars like the F40, Enzo, and the LaFerrari.
But many also thought that the purchase is a large tax write off since all of the sales proceeds would go to charity. But can he really take a $40 million tax deduction after purchasing a Ferrari?
According to IRS rules, if you donate to a 501(c)(3) charity and get a good or service in return, you can only deduct the difference between the price you paid and the fair market value (FMV) of the good or service received. So what is the FMV of the Ferrari Luce? Is it the MSRP of $640,000? The $1.1 million expected auction winning price? Or the $40 million that Wertheim paid?
The Treasury Regulations provides some guidance on this issue. According to Section 1.170A-1(c)(2), the FMV of a contribution of property 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 both having reasonable knowledge of relevant facts. This definition matches the general definition of FMV.
But Section 1.170A-1(h) which specifically discusses payments in exchange for consideration has a special rule that allows a donor to rely on the charity’s written valuation made in good faith to determine the FMV of a good or service unless there is reason to know that the estimate is unreasonable. In fact, the regulation provides an example where a taxpayer can rely on a written good faith estimate provided at auction as the FMV.
In this case, RM Sotheby’s presale estimate was $1.1 million for the bespoke Luce. This estimate is made in good faith and does not seem unreasonable considering the Luce’s MSRP of $640,000 and its disappointing public reaction. If this is the case, Wertheim could potentially take a $38.9 million tax write-off based on the Internal Revenue Service’s own regulations.
The tax rules impose additional substantiation and deduction limitations, and the charity’s documentation matters. For a payment of this size, the donor would need appropriate written acknowledgment and other supporting documentation. The IRS also requires additional reporting for large noncash charitable contributions in circumstances where applicable.
The IRS may have a problem with a billionaire claiming a large charitable deduction after purchasing a Ferrari and may try to argue that the good faith rule should not apply either because the requirements of the good faith estimate rule are not met or that the estimate is unreasonable. If that is the case, then the general definition of FMV should apply and there will be a valuation issue as to whether someone would buy a custom made Ferrari Luce for $40 million considering its middling popularity, relatively modest MSRP and the value of getting closer to Ferrari’s limited allocation list.
While most people will not purchase a Ferrari for $40 million anytime soon, they may one day make a large donation to a 501(c)(3) charitable organization and receive something valuable in return. If they want to calculate how much of the donation they can write on their tax returns, they should obtain a written statement from the organization on the value of the item received. And when they do, determine whether their valuation is reasonable.
Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at [email protected]. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.