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.
Tuesday, March 10, 2009