The Skinny on Tax Deductions for Charity Auctions and Car & Boat Donations

Many people have asked me what the deal is with respect to tax deductions on items donated or bidded on for charity auctions. Here's what I have to say on the subject.

• First off, I am not an accountant, and these opinions represent only that. Get an accountant if you're doing anything serious.
  
• Second, the IRS has written about charity auctions here. They know more than me about this sort of thing.
  
• If you are donating an item to a charity for the purposes of a charity auction - which is by default considered an "unrelated use" from the item's original intent - you can deduct it TO THE EXTENT OF YOUR TAX BASIS in that item. In other words, you can deduct what it cost you (or what it was worth when you obtained it in a taxable transaction), NOT its fair-market value or its appreciated value. Note that other rules likely apply for depreciated assets as well as goods being donated for direct use (e.g., a copy machine). This is about auctions, remember?
  
• If you are bidding on an item in a charity auction, you are making a deductible donation only to the extent that you are paying over the fair market value of the good. And you must be knowingly paying more than the value of the good. There is specific, funny IRS wording, so I'll quote it directly: "'The donor must be able to show, however, that he or she knew that the value of the item was less than the amount paid." My accountant has informed me that this may not be simply the face value of a ticket, if the market value of that ticket is demonstrably over face. So the $3000 you bid for that $150 face-value front-row Bruce Springsteen ticket with meet-and-greet may qualify for a tax deduction, but certainly not the entire amount over $150, and most auctions that are conducted on eBay ipso facto have a market value of the final sale price. Check with an expert if you aren't sure.
  
• Car and boat donations have special rules. File under "if it sounds too good to be true, it probably is" and "no, the barnacled bathtub that's been on blocks for 17 years is not an $80,000 yacht". See for yourself at the IRS website here and here. Basically, you can count the fair market value of the donation, but if it's bound for the auction block, charities are now required to report the actual gross proceeds of the sale.
  
• This is unrelated, but of interest: you cannot deduct your time, even if your time has value and opportunity cost - e.g., you are a $500-an-hour attorney and you give up billable hours while helping a charitable cause. You can, however, deduct mileage and/or out-of-pocket travel costs incurred directly in service to a charitable cause.
  
• For the purposes of everything above, of course I'm referring to legitimate, registered 501(c)3 tax-exempt charitable organizations. If you're dealing with anything else, get thee to an accountancy. In case you didn't know, there are a whole bunch of different 501(c)X's for purposes ranging from the benign to the political, most of which are NOT tax-exempt.

2006 MTV Video Music Award Seats Up for Charity Auction

This year's Video awards, back in NYC and hosted by Jack Black at Radio City Music Hall on August 31, will be even more exclusive than ever, as apparently quite a bit of the theater is taken up for production. So, If you want to go and your name isn't a one-letter moniker like "P" or "Q", cough it up for the cause. 100% of proceeds benefit LIFEBeat. Their words:

LIFEbeat is the music industry's charitable organization dedicated to reaching America’s youth with the message of HIV/AIDS prevention. For more than ten years, LIFEbeat has helped to mobilize the talents and resources of the music industry to raise awareness and funds, and to provide support to the AIDS community.

Over the years, LIFEbeat has emerged as a leading advocate for prevention efforts directed at youth. Recognizing that music has always played a significant role in the lives of young people, LIFEbeat has carved out a unique niche by effectively using the power of music to reach this population. LIFEbeat strives to cultivate a strong sense of self-worth and self- respect in youth to help them resist negative influences that may lead to engagement in risky behaviors.

Bid on orchestra seats to the 2006 MTV Video Music Awards

Posted by: greg on Aug 20, 06 | 6:59 pm
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Sat Aug 05, 2006

Auction as Protest - Against the Auction House

Over on my personal blog, an item about a disgruntled eBayer that may be of interest to this community.

Posted by: greg on Aug 05, 06 | 1:04 pm
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Dinner with Liam Neesen, Voice Lessons from Audra McDonald, Bid your way onto the D-List, and much more

Somebody gets it. This makes my day: a smorgasboard of celebrity experiences on auction benefiting the Actors' Fund of America, who are, in their own words:

"a nationwide human services organization that helps all professionals in performing arts and entertainment. The Fund is a safety net, providing programs and services for those who are in need, crisis or transition.

Auction lots include a range of experiences, from innovative to familiar, including:

• A walk-on role in Rent on Broadway, with what looks like a pretty high-profile package: costume fittings, cast rehearsal, recognition on a special performance night, and seats for your family and friends
  
• Similar packages for Phantom of the Opera - one with a curtain call, one where you get to conduct the orchestra - Mamma Mia!, Mary Poppins, Hairspray, and others
  
• Your portait by Peter Max
  
• Dinner with Natasha Richardson & Liam Neesen
  
• An acting lesson from Lynn Redgrave
  
• Dinner with Kathy Griffin (of My Life on the D List)
  
• Voice lessons from Audra McDonald
  
• VIP tix to tapings of The Daily Show and The Colbert Report
  
• Signed stuff from Julia Roberts, Alec Baldwin, Ralph Fiennes, Anne Heche, Joe Mantegna, David Schwimmer, Mikhail Baryshnikov, Billy Crystal, and others
  
• And much more. . . .
  

Check out the Auction of 1000 Stars here!

Posted by: greg on Aug 05, 06 | 12:03 pm
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Mon Jul 31, 2006

Virtual Charity Auctions Limited only by the Imagination

I love this - people are auctioning fictitious goods inside virtual communities and massively multiplayer online games ("MMO") to raise money for charity. In this case, a custom ride -- a fashion accessory for someone's virtual avatar (see image) -- went for over $2000 in real, hard cash to benefit a cancer charity an organized virtual walkathon that raised over $40,000 (real, hard cash) for the American Cancer Society.

Another nice proof of the concept that anything people are passionate about has terrific charity potential.

Posted by: greg on Jul 31, 06 | 11:34 pm
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