It’s the seventh day of my 12 Days of Charitable Giving. To recap, I’ve asked a panel of judges to review a number of deserving charities as suggested by my readers. I’ll be posting one a day for – well, 12 days (I’m clever that way).
I encourage you to check out the charities voted “most deserving” by my readers and judges. Remember that these are just suggestions and, in most cases, we can’t personally vouch for the good work that these folks do. So be smart. And be generous.
Today’s featured charity was submitted by me. That’s right. I can comment, too! I wrote:
I support Susan Komen for the Cure.
As you may know, my grandmother died of breast cancer and I supported Komen publicly on the blog this year in her honor.
In prior years, I have “walked for the cure” — this year, I am putting together a team to “run for the cure” in May. It’s a 5k run in Philadelphia.
I think it’s important to support a cause that has the potential to affect so many women. More than 40,000 women will die this year from breast cancer in the US. That is more than 40,000 mothers, sisters, aunts, grandmothers, daughters and friends. We can make a difference.
Web site is http://www.komen.org/
A search at irs.gov (which I highly recommend any time you are considering making a donation) reveals that Susan Komen Foundation is on the IRS list of charitable organizations.
Since it was my original pitch, I’ll make a second pitch. I’ll be running a 5k on Mother’s Day 2009 to raise funds for Susan Komen. Help a taxgirl out and support Team Joye in memory of my grandmother, Aline Joye.
You can read about our prior 12 Days’ picks here:
Thanks to our guest judge, Sean Kelly, for choosing Susan Komen for the Cure. It is a meaningful pick since Sean lost his mother to cancer last year. Sean writes the snarky, witty and popular Franchise Pick blog. Sean founded the Marketing Department of Auntie Anne’s Hand-Rolled Soft Pretzels, designed and implemented their national marketing program and served as their first Director of Marketing until founding the national marketing firm, IdeaFarm in 1996 – which means I think he owes me some pretzels!
Taxpayer asks:
Hi,
I run an ice cream (IC) shop and give away lots of IC to local charities (churches, schools, scout’s, 4H, …). The business is an LLC and I have 2 partners (we all get K-1’s). Can I deduct the retail value of these donations? Obviously, the my cost of the food supplies comes out in the wash (eg its part of COGS).
I’ve been told by a couple CPA’s (who were at the time requesting a “tax deductable” donation) that I could.
If I can deduct it, please explain which line(s)/form(s), and how this flows thru to a K-1.
Thanks so much!!
Taxgirl says:
Wow, this is one of those questions that feels easy but isn’t really.
Here’s the “scoop” (sorry, couldn’t resist):
Most LLCs opt to be treated like a partnership come tax time. Since you receive a Schedule K-1, this means that you’re a partner in one of these LLCs.
Yes, LLCs can take deductions for charitable donations. But the rules are actually a little bit tricky.
For purposes of the LLC, you’ll need to attach a statement to your federal form 1065 that separately identifies the charitable donations by partner and category (by now, you’re probably beginning to understand why partnership tax was my least favorite tax course in law school). Your donation deduction will be limited by AGI (adjusted gross income) limitations – noncash contributions like ice cream will likely be subject to the 50% AGI limitations.
If noncash contributions for similar items (like ice cream) exceeds $5,000, the partnership must give each partner a copy of the federal form 8283, to attach to each partner’s tax return.
There are also separate requirements for donations of “food inventory” – like ice cream. The partnership is required to attach a statement to Schedule K-1 that shows the partner’s “distributive share” of the donation. The food must meet all the quality and labeling standards imposed by federal, state, and local laws and regulations. And – this is the important part to you – the value of the charitable contribution for donated food inventory is not FMV, but rather:
the lesser of (a) the basis (cost) of the donated food plus 1/2 of the appreciation (gain if the donated food were sold at FMV on the date of donation) or (b) twice the basis of the donated food.
Again, getting why I don’t love partnership tax?
As to the Schedule K-1, each partner’s distributive share would be reported in box 13 of the respective Schedule K-1 using the proper codes (your code would likely be C).
Don’t forget that you’ll need a written acknowledgment from the charitable organization that shows the amount of cash contributed, describes any property contributed, and gives an estimate of the value of any goods or services provided in return for the contribution. The acknowledgment must be obtained by the due date (including extensions) of the partnership return. You won’t need to attach the acknowledgment but you will need to hang onto it for the partnership’s records.
Hopefully, that all made sense. Good luck – and thanks for being so charitable!
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl!
Taxpayer asks: I regularly donate blood to the Red Cross. Can I deduct this on my taxes?
Taxgirl says: This is by far the most interesting question that I’ve ever received on Ask the Taxgirl – and I’ve received some pretty good queries!
It’s interesting because my first thought was “why not?” It’s a product. It’s clearly something that could be valued. But, alas, the real answer is no.
It appears to be a public policy issue. The Red Cross does not compensate donors for making blood donations. And the government likewise does not offer financial incentives for the donation of blood or organs.
If you’re looking for ways to support the Red Cross which may be tax deductible, click here.
And remember, if you volunteer for a qualified charity such as the Red Cross, your services are not deductible (no matter how valuable!) but you may deduct travel expenses getting to and from the volunteer location. You can take a standard charitable deduction per mile or the actual cost of your gas. Don’t forget about public transit, parking fees and tolls – get those receipts!
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
(Photo source)
We knew that it had to happen. After IRS warned a church in California that it may lose its charitable status following a sermon critical of the current administration, those to the left and right alike began to scramble in their defense of political activism amongst 501(c)(3) organizations.
For organizations with 501(c)(3) status, political campaigning or promoting candidates is prohibited. Full stop. But it happens. And it happens a lot.
In fact, IRS investigations have revealed that nearly three out of four of 110 such organizations accused of violating the ban on "politicking" in the 2004 election did, in fact, do so.
In three cases, however, none of which were churches, the IRS felt that the activities warranted revocation of the groups’ tax-exempt status. The remaining organizations received written warnings, and, in at least one case, a penalty.
Among the prohibited activities, the examiners found that charities and churches had distributed printed material supporting a preferred candidate and assembled improper voter guides or candidate ratings.
Religious leaders had used the pulpit to endorse or oppose a particular candidate, and some groups had shown preferential treatment to candidates by letting them speak at functions.
Other charities and churches had made improper cash contributions to a candidate’s political campaign.
Think it’s over? Think again. The IRS has said that it plans to continue using the special task force to review the activities of charitable organizations, and its speedier procedures, for this year’s election and in the future. Charitable organizations and the professionals that represent them may wish to refer to newly released guidelines for the upcoming election year.
