Taxpayer asks:
Two weeks into the school season and my son has already brought home his first fundraising catalog. They have asked each child in the class to try and sell $150 of merchandise, mostly gift wrap and cookie tins. I don’t have the time or inclination to sell this crap. Can I buy it all and write it off somehow?
Taxgirl says:
Oh, I completely understand where you’re coming from. Even before my kids were in school, I was buying stuff from the neighbors’ kids… It was how we came to have several pounds of frozen jalapeno soft pretzels in our freezer (yes, it was as gross as it sounds).
The bad news is that buying stuff from fundraising catalogs – even if it’s your own kid’s fundraiser – is not deductible in most cases. To the extent that you’re paying fair consideration for goods (meaning you’re paying the fair market value of the item), you can’t take a deduction of any sort. The good news is, you have some options.
One option is to buy the stuff for use at the office or for your own business. We’ve been known to buy fundraising items for client gifts, etc. One year, we bought lots of cookies for just that purpose. Since it was paid for by the office and used for a business purpose, it was deductible as a business expense. The business purpose is important – you can’t buy up all of the gift wrap, stash it in a closet and call it a legitimate expense. It needs to be “ordinary and necessary” to qualify. Use some common sense here. Don’t try to be so cute that you land yourself in trouble. It must be legitimate: Trust me, there’s no way to make jalapeno soft pretzels an ordinary and necessary part of running a law office.
That option works great when you run your own business – but what about everyone else? Here’s another idea: don’t buy the stuff and write a check instead. Many of the fundraising efforts don’t give very much money to the schools, clubs, etc. I figured this out when I was reading a letter that came home with my daughter that noted that the school got to keep something like 20% of the sales. 20%! That means if she sold the $100 of stuff that they wanted her to sell, her school got to keep a measly $20. So, instead of buying $100 myself – or bothering my co-workers and neighbors into buying stuff they didn’t need – I wrote a check directly to the school. It was quick and painless. The school was ahead of where they would have been if she had sold the stuff, I didn’t have to cart home hundreds of pounds of pizza kits or whatever she was selling and I had the benefit of a charitable deduction on my tax return. So long as the school or club is a qualifying charitable organization, donations to the school or club are tax-deductible.
You don’t have to buy yet another smelly candle (unless, of course, you enjoy smelly candles). Cut yourself a break and just write a check instead. It’s fast, it’s easy, it’s tax-deductible – and it won’t make your husband sneeze for a week.
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.
When we closed up our previous office, we found boxes filled with rolls of blue garbage bags. We’re sure that our previous managing partner bought them as a fundraiser from his granddaughter. The boxes weren’t found and opened until 8 years after his death and they were of very poor quality.
I’m sure that our practice deducted the cost when it was incurred.
Well, I’ve found that telling these poor kids that what they’re peddling doesn’t make sense to me and is pure torture for them. Why don’t they offer services that we might need, like lawn-mowing or clean-up for the fall. It would probably make them feel good about themselves, and it could give them some sense-of-self, also. And, BTW, if you find such an industrious youngster, please send him/her my way. I will reward.
Kelly does her usual bang-up job of summarizing the legal issues. The parenting issues are of course, much more complex. Cutting a check directly to the Home & School association is not going to get your child to win a prize for selling n items or more. In our school’s case, that would also mean keeping our son out of social events – a dance party for kids who meet a fairly obtainable goal, and then a limousine ride for lunch out for the really high rollers. Uggh – the social ostracization of kids without the wherewithal to sell candles, Santa toilet seat covers, and frozen enchiladas – sickening. I may have to try and get on my Home and School Board to prevent this as my daughter enters K next year.