Thanks for reading the 25 Days of Giving series! Share with friends, family, & colleagues. Knowledge is indeed a “gift” when it comes to encouraging and maximizing smart charitable giving.
Headed to a holiday party this season? If it’s to celebrate/fundraise for your favorite charity, you might experience an auction (silent or otherwise). Charity auctions can be great fun and it feels like you’re giving back while also gaining a great gift to tuck under the Christmas tree!
Sometimes charity auction participants mistakenly believe their successful bids are completely deductible. However, since the individual receives the auction property, there is usually nofederal income tax charitable deduction. But, if the bid can be shown to be in excess of the fair market value of the item, the amount in excess can be deducted as a charitable contribution.
The charity may make a “good faith estimate” of the fair value of the auction item before bidding commences.
Let’s look at a few easy examples:
Example 1. A $50 gift certificate to a retail store is purchased at charity auction for $40. No deduction.
Example 2. A different $50 gift certificate to the spa is purchased at the charity auction for $70. This generates a $20 charitable deduction.
Example 3. You bid on and win a fruit basket for $30 at an auction supporting a local high school basketball program. The equivalent fruit basket at a local grocery store would cost $15, so you may receive a $15 tax deduction.
Unsure if your actions at a charity auction mean a charitable deduction? It’s always a good idea to get a second opinion. Also, if you’re a nonprofit leader planning on hosting a charity auction it’s advantageous to be briefed on all the tax and legal rules surrounding the event in case donors ask. I’m always happy to help and offer a free one-hour consultation. Reach me by phone at 515-371-6077 or by email at gordon@gordonfischerlawfirm.com.
If you’ve been reading along with the 25 Days of Giving Series throughout December, thank you. If you’ve happened upon the GoFisch blog just now, welcome! I hope to see you back here often.
Giving for the sake of giving is great, however it’s financially wise to make certain your charitable donation is also beneficial in terms of your taxes.
Charitable gifts are defined by the IRS, at least for the purpose of qualifying for a charitable deduction from federal income tax. A review of statutes and caselaw show that the IRS attributes several major characteristics to charitable gifts:
Charitable intent
There must be a clear and unmistakable intention on the part of the donor to absolutely and irrevocably to divest herself of both title and control of the property.
Irrevocable transfer
The irrevocable transfer of the present legal title and dominion and control of the entire gift to the charity so that the donor can exercise no further act of dominion and control over it.
Delivery
The donor must deliver the gift to the charity. (Delivery can be made through a number of ways. This could be hand-delivered, like dropping off a check. It could also mean a secure electronic payment made on the charity’s website. In the case of charitable gifts of grain this could mean physically delivering the grain to a specific silo.)
Acceptance
The charity must accept the gift. For instance, you may want to donate part of your modern art collection to your favorite nonprofit, but if the nonprofit doesn’t have the resources to accept or doesn’t want the collection for some reason, it’s not a charitable gift.
Qualified organization
The donee must be an organization recognized as charitable by the IRS. You can use this IRS online search tool for organizations to see if the charity you’re considering donating to is recognized as tax-exempt.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2015/05/joanna-kosinska-392327.jpg40166016Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-12-11 08:13:022020-05-18 11:28:4125 Days of Giving: Charitable Gifts Defined
Thanks for the reading the 25 Days of Giving series! Each day through December 25, I’m covering different aspects of charitable giving for both donors and nonprofit leaders. Have a topic you want to be covered or questions you want answered regarding charitable giving? Contact me.
The vast majority of public and private universities and colleges are tax-exempt entities as defined by Internal Revenue Code (IRC) Section 501(c)(3) because of their educational purposes and/or the fact that they are state governmental entities. If this is the case, have you ever wondered why tuition for a student to attend a university is not deductible as a charitable contribution? This is known in gift law as as a “personal benefit” transfer. The personal benefit of education for the student is equal to the tuition paid. Because of the benefit value, there is no charitable gift and therefore no federal income tax charitable contribution deduction.
Another example of personal benefit transfer would be payment to a charity for specific services, and such payments are not deductible. In Hernandez v. Commissioner, the U.S. Supreme Court determined gifts of fixed amounts to the Church of Scientology (a tax-exempt religious organization) in exchange for personal counseling were not deductible. The Court held that such “gifts” were more appropriately considered payments for services rather than charitable contributions.
If you ever have a question if a charitable gift is tax deductible, don’t hesitate to contact me. It never hurts to get a second opinion on potential personal benefit situations, especially if the opinion can mean potentially avoiding an IRS audit.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2015/05/freestocks-org-475745.jpg37995698Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-12-10 23:11:232020-05-18 11:28:4125 Days of Giving: What the Personal Benefit Transfer Means for Charitable Contributions
25 Days of Giving: Charity Auctions & Tax Deductions
Charitable Giving, Nonprofits, Taxes & FinanceThanks for reading the 25 Days of Giving series! Share with friends, family, & colleagues. Knowledge is indeed a “gift” when it comes to encouraging and maximizing smart charitable giving.
Headed to a holiday party this season? If it’s to celebrate/fundraise for your favorite charity, you might experience an auction (silent or otherwise). Charity auctions can be great fun and it feels like you’re giving back while also gaining a great gift to tuck under the Christmas tree!
Sometimes charity auction participants mistakenly believe their successful bids are completely deductible. However, since the individual receives the auction property, there is usually no federal income tax charitable deduction. But, if the bid can be shown to be in excess of the fair market value of the item, the amount in excess can be deducted as a charitable contribution.
The charity may make a “good faith estimate” of the fair value of the auction item before bidding commences.
Let’s look at a few easy examples:
Example 1. A $50 gift certificate to a retail store is purchased at charity auction for $40. No deduction.
Example 2. A different $50 gift certificate to the spa is purchased at the charity auction for $70. This generates a $20 charitable deduction.
Example 3. You bid on and win a fruit basket for $30 at an auction supporting a local high school basketball program. The equivalent fruit basket at a local grocery store would cost $15, so you may receive a $15 tax deduction.
Unsure if your actions at a charity auction mean a charitable deduction? It’s always a good idea to get a second opinion. Also, if you’re a nonprofit leader planning on hosting a charity auction it’s advantageous to be briefed on all the tax and legal rules surrounding the event in case donors ask. I’m always happy to help and offer a free one-hour consultation. Reach me by phone at 515-371-6077 or by email at gordon@gordonfischerlawfirm.com.
25 Days of Giving: Charitable Gifts Defined
Charitable Giving, Taxes & FinanceIf you’ve been reading along with the 25 Days of Giving Series throughout December, thank you. If you’ve happened upon the GoFisch blog just now, welcome! I hope to see you back here often.
Giving for the sake of giving is great, however it’s financially wise to make certain your charitable donation is also beneficial in terms of your taxes.
Charitable gifts are defined by the IRS, at least for the purpose of qualifying for a charitable deduction from federal income tax. A review of statutes and caselaw show that the IRS attributes several major characteristics to charitable gifts:
Charitable intent
There must be a clear and unmistakable intention on the part of the donor to absolutely and irrevocably to divest herself of both title and control of the property.
Irrevocable transfer
The irrevocable transfer of the present legal title and dominion and control of the entire gift to the charity so that the donor can exercise no further act of dominion and control over it.
Delivery
The donor must deliver the gift to the charity. (Delivery can be made through a number of ways. This could be hand-delivered, like dropping off a check. It could also mean a secure electronic payment made on the charity’s website. In the case of charitable gifts of grain this could mean physically delivering the grain to a specific silo.)
Acceptance
The charity must accept the gift. For instance, you may want to donate part of your modern art collection to your favorite nonprofit, but if the nonprofit doesn’t have the resources to accept or doesn’t want the collection for some reason, it’s not a charitable gift.
Qualified organization
The donee must be an organization recognized as charitable by the IRS. You can use this IRS online search tool for organizations to see if the charity you’re considering donating to is recognized as tax-exempt.
Want to be sure your charitable gift is indeed a tax deductible charitable gift in the eyes of the IRS? What about charitable gifts or life insurance or a retained life estate? It certainly doesn’t hurt to take me up on my offer for a free one-hour consultation. Give me a call at 515-371-6077 or shoot me an email at gordon@gordonfischerlawfirm.com.
25 Days of Giving: What the Personal Benefit Transfer Means for Charitable Contributions
Charitable Giving, Taxes & FinanceThanks for the reading the 25 Days of Giving series! Each day through December 25, I’m covering different aspects of charitable giving for both donors and nonprofit leaders. Have a topic you want to be covered or questions you want answered regarding charitable giving? Contact me.
The vast majority of public and private universities and colleges are tax-exempt entities as defined by Internal Revenue Code (IRC) Section 501(c)(3) because of their educational purposes and/or the fact that they are state governmental entities. If this is the case, have you ever wondered why tuition for a student to attend a university is not deductible as a charitable contribution? This is known in gift law as as a “personal benefit” transfer. The personal benefit of education for the student is equal to the tuition paid. Because of the benefit value, there is no charitable gift and therefore no federal income tax charitable contribution deduction.
Another example of personal benefit transfer would be payment to a charity for specific services, and such payments are not deductible. In Hernandez v. Commissioner, the U.S. Supreme Court determined gifts of fixed amounts to the Church of Scientology (a tax-exempt religious organization) in exchange for personal counseling were not deductible. The Court held that such “gifts” were more appropriately considered payments for services rather than charitable contributions.
If you ever have a question if a charitable gift is tax deductible, don’t hesitate to contact me. It never hurts to get a second opinion on potential personal benefit situations, especially if the opinion can mean potentially avoiding an IRS audit.