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Nonprofit Law/donated auction items


QUESTION: Our nonprofit holds an annual fundraising auction. Should the value of the donated items to be auctioned be included as contributions on our Form 990-EZ? (We include the proceeds from the auction on line 6b "Gross income from fundraising events," but the value of the donated items doesn't seem to belong there.) And if we are to report the value of the donated items as contributions, is there anywhere on the form where we should note that our total contributions included donated items as well as monetary donations?

ANSWER: You have noncash donations of goods.  Then you have a sale of assets, which are the items that were donated.

Links to Form 990/990-EZ/990-N and instructions are available at

In the instructions to Form 990-ez for 2011 we see in the first column of page 9, in reference to line 1:
" Report the value of noncash contributions at the time of the
donation. For example, report the gross value of a donated car
as of the time the car was received as a donation."

On the right column of page 10, "C. How to value noncash contributions. Report noncash
contributions on line 1 at FMV [fair market value]. If FMV cannot be readily determined, use an appraised or estimated value. See also the instructions for Part II of Schedule B."

As for the sale of assets at a fundraising auction even, on the left column of page 12, "Line 6b. Fundraising events. Enter the gross income from all fundraising events and activities, such as dinners, dances, carnivals, concerts, sports events, auctions, and door-to-door
sales of merchandise."

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.    

---------- FOLLOW-UP ----------

QUESTION: What troubles me is that, when donated auction items are included as contributions, they ultimately raise the organization's net asset or fund balance amount (line 21 of Form 990-EZ). This doesn't reflect the organization's actual net assets or fund balance, since the auction items came in and went out and the proceeds they produced are separately reported on line 6B. The net assets then seem inflated in an unrealistic way.

You can see at line 6b that you need to put in there a number after the "$" sign, which is the fmv of the value of the donated items that sold at auction, "b  Gross income from fundraising events (not including  $    from  fundraising events  reported on  line 1".

That number results in 6b being only the surplus (the sales price at auction minus the fmv of the donated items).

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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