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Documentation Indicating Sales Tax is not Included in Fair Market Value of GIK

  • 1.  Documentation Indicating Sales Tax is not Included in Fair Market Value of GIK

    Posted 05-19-2021 04:35 PM

    Hello – I understand that items including but not limited to sales tax, delivery fees, and shipping costs are not considered part of the fair market value of an item.  Is this explicitly stated in the CASE standards or in IRS regulations?  If so, can you provide me with the specific location in the standards or regulations documentation?  I am looking to add the specific reference to my organization's gift-in-kind policy.  Thanks. 




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    Jeff Harris | Manager, Development Data & Reporting
    University Hospitals | Institutional Relations & Development
    10524 Euclid Avenue, Cleveland, OH 44195
    Office 216.844.0473 | Email jeff.harris@uhhospitals.org
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  • 2.  RE: Documentation Indicating Sales Tax is not Included in Fair Market Value of GIK

    Posted 05-19-2021 09:11 PM
    Pub 561 defines FMV as " the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts." I'm not aware of a reference that specifically excludes taxes, but taxes are, by definition, an additional charge, paid to another party, based on the value of the property in question. Maybe someone can dig up a clear guidance, but this could be a situation where you're trying to prove a negative, so to speak.


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  • 3.  RE: Documentation Indicating Sales Tax is not Included in Fair Market Value of GIK

    Posted 05-20-2021 06:22 AM
    Jeff, it is probably helpful to remind everyone that determining the value of a charitable deduction is the donors' responsibility.  We never provide that value information to our donors.

    Also remember that for both CASE and IRS purposes, values are often determined through appraisals.  Those appraisals value the property.  They do not include temporary costs or expenses associated with moving that property.  The CASE standards reference this appraised value in several spots.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
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  • 4.  RE: Documentation Indicating Sales Tax is not Included in Fair Market Value of GIK

    Posted 05-20-2021 08:40 AM

    Maybe just one or two additional thoughts.

     

    The most fundamental level of tax deductions for charitable contributions is the requirement that a charitable contribution consists of either cash or property other than cash, and taxes and shipping costs incurred by the donor are neither property or cash.

     

    Similarly, for internal valuation for CASE purposes, the FMV is what the recipient would have had to pay for the property if the recipient had purchased the item rather than receiving it as a gift.  So, for example, if there is a non-profit discount for an item, that is what the charity would have had to pay and is therefore the value of the gift, not the higher price that the donor may have had to pay for the item as a private individual.  Similarly, for the most part, qualified charitable organizations are exempt from paying sales tax on expenditures made in support of their mission, so the sales tax is not, in any case,  part of what the qualified recipient would have had to pay.

     

    The interesting analysis for me has always been at what point the contributed property becomes the charitable recipient's property.  If, for example, the charity takes possession of the, say, horse, or piano, or office furniture while the property is a thousand miles distant, then one might argue that transporting the property is the responsibility of the recipient, and if the donor relieves the recipient of that expense of transporting the property, either by transporting the property or paying for the transport, that is a gift underwriting the institution's expense.  However, in the general two-party donation transaction, the charitable donation is instead not considered to have taken place until the property has been delivered to the charity, that is, until the recipient has the property "to have and to hold" in the venerable language (which we now encounter more commonly in another context).  And, until the donation has been completed, the associated expenses, like delivering the property, are the donor's, not the recipient's.

     

    My US$0.02 worth; the usual disclaimers apply.

     

    Good luck!

     

    Alan

     

    Alan S. Hejnal   

    Data Quality Manager

     

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    Smithsonian Institution - Office of Advancement

    600 Maryland Ave SW Ste 600E

    PO Box 37012, MRC 527

    Washington, DC 20013-7012

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