If a company donates products to a public charity to sell through an auction program, what charitable contribution deduction will be available to the donor?
If a donor gives personal property to a charity that does not use the property in its charitable program, the deduction is based on the lesser of the donor’s cost basis of the property or its fair market value. If the property is sold in a broad auction such as eBay, the sale price may be probative of the fair market value. If the donor originally claimed a deduction based on a fair market value higher than the cost basis and filed the Form 8283 (with an independent appraisal if the value claimed is more than $5000), the charity will have to report the actual sale price and the deduction will be limited to cost basis. If the sale comes in the year after the gift, the donor will have to take into income the difference between the claimed deduction and the basis. (See Ready Reference Page: “Charities Have New Opportunities, Responsibilities in Fundraising.”)
Companies that give inventory that is actually used by a charity for the care of infants, the ill or the needy may claim a deduction equal to the basis plus one-half of the ordinary income that would be realized on its sale (not to exceed twice basis). (See Ready Reference Page: “Corporations Have Special Rules on Contributions.”) It is not clear from your question whether the products are inventory, but it is clear that they are not being used by the charity in its program.
State Charitable Solicitation Statutes: Everything You Wanted to Know But Were Afraid to Ask
Charities that seek contributions nationally must typically register in 39 states and the District of Columbia before starting to solicit. Furthermore, for-profit fundraisers are also required to register and file their contracts and other documentation with many states. Since many states are increasing their enforcement efforts to ensure that charities and fundraisers are complying with initial and annual registration requirements, it's important that charities and fundraisers abide by these statutes.
Program materials include an extensive review of the statutes and their provisions, plus a copy of the Uniform Registration Statement for multi-state filings. Purchasers will receive an e-mail receipt that includes a link that will take them to the product download. The download is a pdf file. Learn More
Weekly question and answer
Notice of each full edition
and its free stories
Report on 501(c)(3) electioneering
What our readers say about Nonprofit Issues
Once again you've tackled a tricky question and explained it so we all can understand the issue.--M.V.
Thank you for your informative and keen advice on nonprofit matters. I believe it's a unique and concise place to get answers to this often wispy area called nonprofit. --R.T.
Have a question?
Other ways to
Talk to the Editor
Next Conference Call:
Thursday, August 7, 2014
Participate in this bi-monthly telephone seminar conference call and ask your questions directly to Editor Don Kramer.
Access the entire site
($9.95/24 hours, $17.95/3 months).
Full Day Program
A well-received full-day program that covers the current hottest topics in nonprofit law. Qualifies in Pennsylvania for Continuing Education credits.
Don is available for programs and speaking engagements ranging from a one-hour presentation to a full-day primer on nonprofit law. Contact us if you are interested in having him speak at your program.