Heritage Auctions Appraisal Services
All About Appraisals: Charity Auctions & Tax Deductions
By Meredith Meuwly
As more and more charities are hosting auctions as fundraisers, clients are asking if they can take a fair market value tax deduction on their donations to these auctions. The answer is maybe. Because of the Related Use rule, taxpayers may or may not be able to take the full fair market value tax deduction for their donations of tangible property to a charity auction.
According to the IRS, the donation of the tangible property must be related to the non-profit's purpose or function in order to receive the full tax benefits of the charitable donation. The IRS does not consider Items donated to an institution that will be sold in a fundraiser as related use, even if the funds from the sale are to be used to support the institution's mission. The reason being is that the institution's mission is typically not to sell property. As such, items donated to a charity auction are typically considered Unrelated Use, and donors are only allowed to take their cost basis or the fair market value as a deduction, whichever is less.
Instead of donating tangible property to the charity fundraiser, a client may consider the option of selling the property through an auction and then directing that the proceeds generated from the auction be given directly to the charity. Heritage's dedicated Charity Auctions department is always seeking consignments to benefit your favorite charity. Contact Kristen Schultz, Director of Charity Auctions, at KristenS@HA.com today to see how Heritage can best serve you.
Whether you want to give property or cash to charity, always consult your tax advisor to see what option is most beneficial to you.
After five years at Christie's in New York, Meredith Meuwly joined Heritage Auctions in 2007 as Senior Consignment Director in the Fine & Decorative Arts Department and currently manages the Appraisal Services department. In 2009, Meredith participated as an appraiser for the Antiques Roadshow on PBS. She is also a member of the Fine Art committee for the International Society of Appraisers and looks forward to assisting with any formal appraisal needs.