Business Accounting Question

[Eric Morey]

On Thu, 2011-03-17 at 19:20 +0000, Fred Bone wrote:
> Do they not publish guidelines on this sort of thing? HMRC certainly
> do 
> (though of course the guidelines are not interchangeable, as they
> reflect 
> different tax laws).

This is why tax accountants and tax attorneys will always be needed in
the USA. IRS publications are intentionally vague and are not the law
(only interpretations of the law that can not be cited in court).      

In any event, it is more conservative and less hassle for the non-profit
organization to use the price of merchandise sold as the fair market
value anytime there are comparable items regularly sold at that price by
for profit organizations.  

The best I've found is the statement below in an IRS publication about
Charitable Contributions
http://www.irs.gov/publications/p526/ar02.html#en_US_2010_publink1000229696

##### Warning: a bit dry and long#####
Excerpt from IRS publication: 
"Contributions From Which You Benefit:

If you receive a benefit as a result of making a contribution to a
qualified organization, you can deduct only the amount of your
contribution that is more than the value of the benefit you receive.
Also see Contributions From Which You Benefit under Contributions You
Cannot Deduct, later. 

If you pay more than fair market value to a qualified organization for
merchandise, goods, or services, the amount you pay that is more than
the value of the item can be a charitable contribution. For the excess
amount to qualify, you must pay it with the intent to make a charitable
contribution. 

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. 

(snip)

Charity benefit events.   If you pay a qualified organization more than
fair market value for the right to attend a charity ball, banquet, show,
sporting event, or other benefit event, you can deduct only the amount
that is more than the value of the privileges or other benefits you
receive. 

  If there is an established charge for the event, that charge is the
value of your benefit. If there is no established charge, your
contribution is that part of your payment that is more than the
reasonable value of the right to attend the event. Whether you use the
tickets or other privileges has no effect on the amount you can deduct.
However, if you return the ticket to the qualified organization for
resale, you can deduct the entire amount you paid for the ticket. 

Even if the ticket or other evidence of payment indicates that the
payment is a “contribution,” this does not mean you can deduct the
entire amount. If the ticket shows the price of admission and the amount
of the contribution, you can deduct the contribution amount. 

Example.

You pay $40 to see a special showing of a movie for the benefit of a
qualified organization. Printed on the ticket is “Contribution–$40.” If
the regular price for the movie is $8, your contribution is $32 ($40
payment − $8 regular price). 

(snip)


Contributions From Which You Benefit:
If you receive or expect to receive a financial or economic benefit as a
result of making a contribution to a qualified organization, you cannot
deduct the part of the contribution that represents the value of the
benefit you receive."