Tax Strategies & Credits

Can Charity Event Attendees Deduct the Cost of their Auction Purchases?

by
Bob Mason
on
6/8/2015
Can Charity Event Attendees Deduct the Cost of their Auction Purchases?

One of the most popular and effective ways for charitable organizations to raise money is to host events where items that have been donated are put on display or listed in an auction program and attendees then bid on them during an auction. It provides a fun activity and can be extremely successful. The attendees walk away with something that they value as well as the benefit of knowing that they have contributed to a cause they believe is worthwhile, but are often left wondering whether they are able to deduct the purchase price as a charitable contribution. The answer lies in whether the price that was paid exceeds the item's actual value.

According to the Internal Revenue Service, items that are purchased at a charity auction should have a good faith estimate of its value so that event attendees who pay more than the item's fair market value can deduct the excess as a charitable contribution. There are a number of ways that this value can be determined: many charities provide that information within the auction catalogue or on the receipt for the purchased item. This provides a paper trail for taxpayers who can then document the amount that they deduct.

In addition to bidding more than an auction item's fair market value, those who wish to make a contribution to a charity can also approach the event from the other direction and contribute items to be auctioned to attendees. Those who make contributions of property to be sold are limited in their deduction by their tax basis rather then the item's fair market value. Section 170 of the Treasury Regulations specifically spells this out, indicating that an item that is put to an unrelated use (meaning that it not related to the charity's function or exempt purposes) can only be written off based on the donor's tax basis on the property. In the case of a donated item, a charity selling the item cannot be considered related to its purpose. For more information on writing off charitable contributions or other financial issues, contact Coast Financial Services at (831) 462-0330.

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Bob Mason

Bob Mason

Bob Mason is the founder of Coast Financial Services Inc. servicing both the Santa Cruz, and San Jose areas. Bob Mason is a skilled financial professional who is fully equipped to assist any of your accounting needs. Founding his firm in Santa Cruz, Bob understands the importance of small businesses and how they form the backbone of the area. Coast Financial Services, Inc. has been dedicated to the growth and profitability of businesses in Santa Cruz for 17 years. To learn more about Bob Mason and the rest of his team, visit their website.

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