Charity Auction Tax Deductions

Your Guide to State, Local, Federal, Estate + International Taxation

So you had a good year and you’re looking around for tax deductions to help ease the pain come April 15th. Then you remember that your church has their annual charity auction coming up and they are always looking for items to be donated for a good cause, right? So you start to think…hey, I’ve got that old football that I was fortunate enough to get Kurt Warner to sign some years ago collecting dust in my man cave. I’ll bet it could fetch big bucks at auction and give me a hefty tax deduction, right? Well, in short…probably not.

Donors who provide goods for charities to sell at an auction often ask the charity if the donor is entitled to claim a fair market value charitable deduction for a contribution of appreciated property to the charity that will later be sold. While well intentioned, sometimes they give an incorrect response that would be better left to a qualified tax preparer to answer.

Under these circumstances, the law limits a donor’s charitable deduction to the donor’s tax basis in the contributed property and does not permit the donor to claim a fair market value charitable deduction for the contribution. Specifically, the Treasury Regulations provide that if a donor contributes tangible personal property to a charity that is put to an “unrelated use”, the donor’s contribution is limited to the donor’s tax basis in the contributed property. The sale of the item is considered unrelated, even if the sale raises money for the charity to use in its programs. So, in this case, only the cost of the football itself is deductible even if it brought well above that at charity auction. So, it looks like my collection of autographed baseballs will continue to collect dust in my man cave.

By Dale F. Jensen, CPA