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FMV for Event

  • 1.  FMV for Event

    Posted 29 days ago

    Hi,

    I am looking for some information on what other independent schools and/or colleges with benefit events are doing in regards to receipting donors for sponsorships and tickets for events. While I know it is standard practice to deduct the FMV or cost per head from the donation and the balance of that is tax deductible, we are wondering if places are using the full FMV, which is the entire cost of the event divided by the number of people, or if they are just using the catering cost as the price per head?

    Also if anyone has any samples of receipts or letters with deduction language, I would love to see some updated examples. Thank you!



    ------------------------------
    Maggie Raiken
    Director of Advancement Services
    Sage Hill School
    raikenm@sagehillschool.org
    ------------------------------


  • 2.  RE: FMV for Event

    Posted 29 days ago
    The IRS defines the fair market value (FMV) as what a willing buyer would pay a willing seller (see IRS Publication 526).

    So, FMV might not be the "cost per head."  In fact, it is not the cost per head when someone underwrites a portion of the expenses, or someone donates some of the food or beverages.

    True, you could use the cost per head to get to a figure.  And you could also use the catering costs as a figure.  But neither figures are necessarily the FMV.  For that, you must put yourself in the attendee's shoes and consider the ambiance, entertainment, and other factors.  And then ask and answer the question, "If I were John or Sue Doe and I was going out on the town with my SO, what would I expect to pay for such an event/activity?"

    BTW, IRS Publication 1771 gives straightforward language for a quid pro quo receipt - which is what this calls for.  You do not have to do anything fancy.  Just something like, "Thank you for your payment of $XXX for which you received two tickets to attend the 123 event, valued at $XX per person.  Therefore, your charitable donation amount is $ZZZ."

    And don't forget, you cannot accept payments from DAFs or private foundations that result in a benefit - including event attendance.

    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: FMV for Event

    Posted 29 days ago
    Maggie, the IRS provides a lot of leeway for calculating the FMV: " An organization may use any reasonable method to estimate the fair market value (FMV) of goods or services it provided to a donor, as long as it applies the method in good faith. "

    Calculating solely based on the catering costs and excluding other goods and services rendered that are substantial in value is probably not 'in good faith' - you can't rent the Waldorf and only pass along the cost of the catering. 

    However, you don't need to assess FMV based on the cost to you. You can estimate by using the value of a similar evening of entertainment and food. You might look for a comparable to your event, e.g. a nice dinner out at a similar venue that offers live music, and use that amount as the FMV, instead of basing it specifically on the cost of executing your event, divided by attendees. The FMV is ultimately a question of what the thing you're providing is worth, not what it costs you. Just document your method to be in compliance. 

     
    Thank you,
    Isaac Shalev
    Data Strategy Expert
    Sage70, Inc.
    (917) 859-0151
    isaac@sage70.com

    Schedule a 30-minute consultation now:






  • 4.  RE: FMV for Event

    Posted 29 days ago

    Probably the main point that I would add to the helpful discussions by John and Isaac is that, while our viewpoint naturally defaults to that of our organization as putting on the event, the IRS looks at this the other way around, from the point of view of the taxpayer: what did the taxpayer contribute and what would the taxpayer have had to pay for whatever it was that they received in return.

     

    That means that our cost is mostly irrelevant: the value of what the taxpayer received doesn't change whether we got it all for free or whether we badly overpaid for it.

     

    It also means that we're talking about retail cost: what would the taxpayer have had to pay for a similar dinner for two, inclusive, in a comparable venue with similar amenities.  The individual donor wouldn't be contracting for a dinner for 200, so the FMV isn't twice the per-person price when buying a dinner for 200, it would be the price for two people when buying a dinner for two.  (The same point applies to, say, giving a donor a polo shirt, where the FMV is the retail price, not the price we would get buying shirts in bulk.)

     

    My US$0.02 worth; the usual disclaimers apply.

     

    Good luck!

     

    Alan

     

    Alan S. Hejnal   

    Data Quality Manager

     

    SNAGHTML5cbfa34

     

    Smithsonian Institution - Office of Advancement

    600 Maryland Ave SW Ste 600E

    PO Box 37012, MRC 527

    Washington, DC 20013-7012

    Voice: 202-633-8754 | Email: HejnalA@si.edu                                                                                                                                            

     






  • 5.  RE: FMV for Event

    Posted 29 days ago

    Thank you all for this information. Very helpful!

     

    Maggie Raiken

    Director of Advancement Services

     

    Sage Hill School

    20402 Newport Coast Drive

    Newport Coast CA  92657

    Direct Line: 949-219-1342

     

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