August 12, 2016 Benefit Auctions and IRS Allowances
I was knocking around the IRS website the other day (yeah, pretty sad, huh?) and stumbled across some information I thought would be interesting to nonprofits and their donors.
We all know when we purchase an item at a benefit auction we can only claim a charitable contribution deduction for the amount above the fair market value of the item. Note that the IRS website indicates that donors must be able to show that they were aware that the value of the item was less than the amount paid. As a nonprofit, you can easily accomplish this by publishing a catalog which includes fair market value for auction items.
What shocked me is the second portion of the information on the IRS website about donations which speaks to the law that limits goods that donors provide for charities to sell at auction. There are laws limiting these deductions that I was unaware of. Check out the website above to fully understand how these laws work.
Be very careful what you tell your donors regarding tax law when procuring donations for your auction. I caution you that the only piece of advice you should give them is to contact their tax professional for information on deductions and such. You don’t want to find yourself in the middle of a situation where you don’t belong.
Make sure your nonprofit is working within the guidelines of the IRS when it comes to your fundraising auction events.
Make every minute a revenue generating minute!
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