Tax Aspects of Current Charitable Giving
| Publication year | 1982 |
| Pages | 2577 |
| Citation | Vol. 11 No. 10 Pg. 2577 |
1982, October, Pg. 2577. Tax Aspects of Current Charitable Giving
Each year billions of dollars in cash and property are contributed to religious, educational, charitable and other tax exempt organizations. The major motivating factor for such gifts generally is philanthropy. However, federal and state tax deductions associated with charitable giving do have a significant impact. Tax deductible gifts to qualifying tax exempt organizations may take many forms: current gifts or gifts of future interests; outright gifts of property or gifts in trust; remainder interests in personal residences or present interests in conservation easements. The following discussion concentrates on the various federal income tax aspects of making current gifts.
Many factors bear on the tax benefits of charitable giving, including the type of property donated, the type of organization to which the property is donated, the way the property is used by the recipient organization and the tax profile of the individual taxpayer. Tax deductions are permitted under § 170 of the Internal Revenue Code of 1954, as amended ("Code"). Section 170(a) (1) provides that a deduction from gross income shall be allowed for "charitable contributions." Section 170(c) defines a charitable contribution as a contribution or gift made to or for the use of certain organizations classified as "qualified donees."(fn1)
A gift has been defined as a voluntary transfer of property by one to another without any consideration. Generally, a gift must result from affection, respect, admiration, charity or like impulses and not in return for any benefit.(fn2) If the taxpayer receives something of value in return, the burden is on the taxpayer to prove that the benefit he received was not material or that the amount of the donation exceeded the value of the benefit received.
Whether the taxpayer has received a material benefit in return for his contemplated gift is at times contrary to what is generally viewed as a tax deductible contribution. For example, a qualified charitable organization sponsors a symphony concert for the purpose of raising funds for its charitable programs. The charity requests a $10 donation in exchange for each symphony ticket. The $10 donation is comparable to the price generally charged for similar symphony concerts. Even though the taxpayer purchased the ticket for the purpose of benefiting the charity, no part of the donation is deductible. The IRS presumes that the donor received quid pro quo for his payment unless he can establish that the amount paid is in excess of the value of the privilege or benefit received. The result is the same even though the charity states that the donation is "tax deductible."(fn3)
Evn if the taxpayer never intended to attend the symphony concert, the IRS's position is that there is no deduction because the taxpayer had a right to attend the concert and such right constitutes a benefit equal in value to the amount of the donation.(fn4) If, however, the donation exceeds the value of the benefit, as for example, the taxpayer donates $30 for the $10 symphony ticket, he will be allowed a $20 charitable deduction, which is the difference between the benefit received (a $10 symphony ticket) and the $30 donation.(fn5) If a taxpayer desires to deduct the total cost of the donation, he should make the contribution and refuse to accept the ticket(fn6) or he should return the symphony ticket to the charity prior to the date of the concert accompanied by a letter stating that he is donating the symphony ticket back to the charity.(fn7)
The purchase of charity raffle tickets also gives rise to the presumption that the purchaser received quid pro quo for his payment. If a taxpayer purchases a ticket to a fundraising event and the event is considered to be of no material value to the taxpayer, he is not considered to have received a benefit and, therefore, the price of the ticket is deductible. However, if for example, the purchased ticket entitles the taxpayer to a chance to win a valuable door prize, the IRS's position is that no part of the price of the ticket is deductible because there was a "chance" that the taxpayer would receive something of value in exchange for his donation.(fn8)
Once it is determined that the donation will be treated as a bona fide gift,
it must also be determined whether or not the recipient organization is...
To continue reading
Request your trial