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In determining the tax deductible amount for a fundraising

Customer Question
activity, should all expenses be...
In determining the tax deductible amount for a fundraising activity, should all expenses be included (band, decorations token gifts) or just the food items (catering costs)?
Submitted: 6 years ago.Category: Tax
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6/1/2011
Tax Professional: Jax Tax, Tax Attorney replied 6 years ago
Jax Tax
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1,408
Experience: JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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Jax Tax :

All costs associated with a fundraiser may or may not be taken into account. Where or if they are deducted depends on the type of organization that is holding the event. ie Corporation, Non Profit, Individual. If you give me a little more information, I will provide more detail. Also, I need to know if the fundraiser was the main purpose of the event. Was it a political rally or for girl scouts. Basically, I need the type of organization the fundraiser was held for.

Customer:

This is a non profit organization. The fundraiser is to raise funds for our scholarships and service programs conducted in the community -- working with students in the school system, mentoring homeless women, educational programs on health issues and a variety of other service projects. It was not a political rally, but a jazz brunch.

Jax Tax : So long as the board or owners do not directly or indirectly benefit, they are deductible.
Jax Tax :

I am following up with you in regards XXXXX XXXXX question. I want you to know I am available to clear up any concerns. I realize that the answer is complex and can be confusing to say the least. The good news is that I am here to help you. Financial decisions are tough and tax implications can vary substantially based on small decisions. I do my best to give answers that are clear but some concepts are complex by nature. With that said, let me know if I can help. I always appreciate any feedback or comments regarding my service whether positive or negative though I do prefer the first. Have a great day. It was a pleasure assisting you. If I have help, accepting my answer allows me to get credit. This does not create additional charges to your account. It only provides me credit for my time.

Customer:

Sorry, I got real busy this week. I want to be clear about this. I'll give an example/

Customer:

Ticket price is $70.00

Customer:

Expenses including catering and decorations, etc. = $50 tax deductible amount? $20.00 or $70.00? Second example Ticket = $70 Expenses =catering $30 Tax deductible amount $40 or$70.

Customer:

hello

Jax Tax :

The expenses are deductible.

Jax Tax :

I don't quite understand what you are asking.

Jax Tax :

Are you asking what the non profit can deduct as an expense or what you can deduct on your personal return for helping with the fundraiser?

Customer:

Ok, you say all expenses are deductible, it seems. I've been under the impression that for the person purchasing the ticket only the amount the organization declares as deductible can the purchaser use as a tax deduction. So, I'm trying to determine, for the organization determination of what it cn tell the purchaser is tax deductible, is it the full price of the ticket or the price of the ticket less expenses per ticket? In calculating expenses, is it all expenses or just the cost of the meal?

Jax Tax :

Is the non profit a 501c3

Customer:

yes

Jax Tax :

I was under the impression that you were asking what expenses the non profit could use. If a person purchases a ticket for an event like a dinner, it is non deductible as a charitable donation because they are receiving a good for the cost.

Jax Tax :

The purchaser cannot use any of the cost of the ticket as a deduction.

Jax Tax :

Only donations can be deducted. This means that there is no exchange. In this case the ticket purchase is for admittance, dinner, entertainment etc. It is not deductible by the purchaser.

Customer:

Even if the cost of the ticket is greater than the cost of all expenses?

Jax Tax :

I see. the expenses don't really come into play.

Jax Tax :

You can deduct the difference in the value received and the value paid.

Jax Tax :

So if the ticket is $70 and the value of the event is $30, then the deduction is $40. You could use the expenses as a guide, but it is really just a subjective decision.

Customer:

Thank you. It took us a while, but we finally got there.

Jax Tax :

Just determine what an average person would pay for a similar event. The difference is then the deductible portion. Here is an example from the IRS.

Jax Tax :

From Publication 526

Jax Tax :

Example 1.


You pay $65 for a ticket to a dinner-dance at a church. All the proceeds of the function go to the church. The ticket to the dinner-dance has a fair market value of $25. When you buy your ticket, you know that its value is less than your payment. To figure the amount of your charitable contribution, you subtract the value of the benefit you receive ($25) from your total payment ($65). You can deduct $40 as a charitable contribution to the church.



Example 2.


At a fund-raising auction conducted by a charity, you pay $600 for a week's stay at a beach house. The amount you pay is no more than the fair rental value. You have not made a deductible charitable contribution.


Jax Tax :

I am sorry. I thought the question was kind of strange. Now I see what you were asking. Sorry, but we did get there.

Jax Tax
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1,408
Experience: JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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