I don't have the IRS publication number memorized, but there is a document on this subject you can order for free from www.irs.gov. It should give you the definitive word on the subject.

One related point I remember is that an artist can claim only the cost of the materials as a charitable donation, not the hoped-for retail selling price (for ex: a local artist donates a painting to your auction). How does that translate to the deductibilty of your auction items? Not really sure. Read the IRS's publication.

What we do is put "priceless" as the value on items that have no generally recognized retail value (like a sleepover in the media center), and make our disclaimer something like, "purchases are deductible to the extent allowable by law". That takes the responsibility away from the group and on the buyer and his/her accountant where it belongs.

We put values only on items with recognizable retail value. If the item has been embellished, like a kid-painted basket full of cosmetics, then I think we would still only use the value of the cosmetics plus the cost of the plain basket.

In the case of the kindergarten picture, I would think that that would be a token benefit of the contribution and you do not have to give the statement. In essence, the whole contribution is deductable.

I see where you're coming from, but I don't think that's the right application of the "token value" concept. I'm pretty sure that is geared more towards something like the people who send you greeting cards or personalized address labels--that type of thing--in exchange for your anticipated contribution. If something is in a nice frame, or it's a nice plain wooden bench that has been painted, I think that goes over your typical token item.

The IRS is concerned with someone taking too much of a deduction, not too little. That's why I lean towards using the final sale value as the FMV on everything you might consider priceless, and therefore making no part of the final sale value deductible. The only downside I see to this is in the case of someone paying a lot of money for something, like kindergarten artwork, that they know they are "overpaying" for, with the intent of taking a deduction for charitable contributions, only to find that your paperwork prevents it. They might be ticked off; but, if they were upset you could probably work out something with them after the fact. The reality of the situation is that most people are probably clueless that any part of this might be deductible to begin with.

And on JHB's point (which actually goes to the original intent of this whole thread)--

But then how do you balance that with marketing your "priceless" concept? I think I would put a disclaimer in the program or as a handout explaining how the FMV will be determined on these type items and that at donor will be provided a receipt. Or you might just add it in fine print on your bid sheets.

I think she's right on target--I like the general disclaimer in the program the best.

I've also heard that in an auction situation the winning bid is generally assumed to be the fair market value (FMV) of the item. Therefore, it is a sale and there is no charitable contribution associated with the transaction. However, if the winning bid is clearly in excess of a well-documented value (such as the face amount of a gift certificate), the bid amount in excess of that value may qualify as a charitable contribution deduction. The organization needs to document this carefully.

So if your goal is to encourage higher bids by advertising that the portion over FMV can be claimed as a charitable donation, this is an important distinction.

Take the children's art project - in real life, what could you sell it for? You're probably right to add up the cost of materials and maybe a bit more to establish a FMV of $5 or $10 or whatever.

But then how do you balance that with marketing your "priceless" concept? I think I would put a disclaimer in the program or as a handout explaining how the FMV will be determined on these type items and that at donor will be provided a receipt. Or you might just add it in fine print on your bid sheets.

Here are some links that may help:

www.philanthropyroundtable.org/magazines...0-03/donorqanda.html

www.runquist.com/article_deduct.htm

www.allianceonline.org/FAQ/financial_man...s_tax_deductible.faq

In the case of the kindergarten picture, I would think that that would be a token benefit of the contribution and you do not have to give the statement. In essence, the whole contribution is deductable.

Look at IRS publication 526, page 4. I tried to copy it but it wouldn't let me. Basically, it says there is an exception for giving the statement if the benefit received is a token item. I know that we all love our kids, but let's get real. What's the real value of a kindergarten's painting?

PottsvilleMom--Do you remember if there was a distinction made between something like the Dale Earnhardt car, which would certainly have value outside the general school market, and something like artwork by the school's children? I have a vague recollection of seeing an auction receipt a few years ago where the "priceless" value of something signed by Bill Clinton was set at the final auction bid, but the FMV of a framed art piece by a first grade class was set at pretty much the cost of the frame.

Mostly just curious--the safest way for anyone who is running an auction to take care of something like this would be for you to list the final bid price of the "priceless" type items as the FMV, so that there is no deduction for a charitable donation allowed. That gets you out of the business of determining the FMV and simplifies the paperwork, while still adhering to the IRS regs.

That makes more sense, thanks. So I only have to deal with letters to people who spend more than $75 on items that are quite literally not worth as much as they spend on them. Well, there might be a couple of those, but that will be pretty easy.