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Calculating Charitable Portion for Auction Purchases

  • 1.  Calculating Charitable Portion for Auction Purchases

    Posted 10-26-2021 05:38 PM
    Scenario: 

    Online wine auction, bidder wins two lots: 

    $320.00     $160.00     $0.00                         $9.60      $0.00                     $169.60                 Lot 1
    $975.00     $980.00     $5.00                       $58.80      $0.00                  $1,038.80                 Lot 2

    $1,295.00  $1,140.00  $5.00                       $68.40                                 $1,208.40

    The two auction lots were paid through one credit card charge of $1,208.40

    • What is the FMV on this acknowledgement letter? 
    • What is the charitable portion listed on this acknowledgement letter?
    This may be really obvious, but given that one of the lots does have $5 over FMV, my brain is confusing the situation. ​
    The total value paid is less than the FMV of the two lots combined... so is the charitable portion on this acknowledgement letter $5 or $0?

    How would you construct an acknowledgement letter for this purchase?

    Thanks in advance. 

    Katie

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    Kathryn Rusak
    Director Advancement Operations
    College for Creative Studies
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  • 2.  RE: Calculating Charitable Portion for Auction Purchases

    Posted 10-26-2021 05:53 PM
    Why are you charging taxes on charity auctions?  That is not at all standard.  The institution typically "absorbs" the tax burden and pays the state in one lump sum from the total auction proceeds.

    Taxes aside, there is only one gift here to receipt - the one with the $5 "overpayment."  I would issue a QPQ receipt for that purchase only, indicating something like,

    Thank you for your charity auction purchase of $980 for which you received wine valued at $975.  Therefore, your tax-deductible contribution is $5.00.

    John
    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987






  • 3.  RE: Calculating Charitable Portion for Auction Purchases

    Posted 10-27-2021 12:28 PM
    Thanks, John! Apparently the College used to absorb the taxes but that was changed a few years ago (prior to me, I've not yet been with this institution 2 years and nothing has been exactly the same as it was before due to COVID19).  My VP and I are in agreement that we would move away from this model for any future charity auction we host (she wasn't aware this was the practice either), concurring with your points. 

    Really appreciate your feedback! 

    Katie

    ------------------------------
    Kathryn Rusak
    Director Advancement Operations
    College for Creative Studies
    ------------------------------