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Nonprofit Law/Donation in Exchange for Services

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Question
QUESTION: Hi -

I gave a non-profit dance company $500 in exchange for their dancing at my wedding. Can I claim this as a charitable tax deduction on my taxes ? Also, I would like for the company to dance at a corporate event for the same $500, can the corporation claim this a charitable donation on its taxes ?

ANSWER:  As to charitable deductions, see IRS Publication 526 "Charitable
Donations"  which is available at:
http://www.irs.gov/pub/irs-pdf/p526.pdf
on page 6 middle column under the heading "Contributions
You  Cannot Deduct" is "3. The part of a contribution from which
you receive or expect to receive a benefit"

You were expecting a benefit and, in fact, contracted for that benefit, so there is no charitable contribution from what you wrote. Same answer for the corporation.

Harvey Mechanic, Attorney at Law -
Harvey108@hotmai.com

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: Thanks for your reply. The code says " the part of the contribution from which you receive or expect to receive a benefit. " Based on the code you specified, it seems that if the value of the dance the non-profit provided was $200 then I can deduct $300 from my taxes - not the whole $500, correct ? ($200 is the fair market value of the dance or the contracted benefit; and $300 ( $500 - $200) is the charitable portion of the donation.

Answer
Earlier you did not specify that there was any value less than the $500 that you gave to the charity, but, now you specify a value of $200.  It appears that you are citing to code section 170 as that is the code section that deals with charitable deductions. 26 U.S.C. §170 is available at:
http://www.law.cornell.edu/uscode/text/26/170

I don't see the quotation there in that section.  If you send me the citation (subsection) I can comment further on it.

The Treasury Regulations relating to charitable deductions are at 26 C.F.R. § 1.170A-1 which is available at http://www.law.cornell.edu/cfr/text/26/1.170A-1 and we see in a subsection(h):
--- Start of Excerpt ---
Payment in exchange for consideration—
(1) Burden on taxpayer to show that all or part of payment is a charitable contribution or gift. No part of a payment that a taxpayer makes to or for the use of an organization described in section 170(c) that is in consideration for (as defined in § 1.170A-13(f)(6)) goods or services (as defined in § 1.170A-13(f)(5)) is a contribution or gift within the meaning of section 170(c) unless the taxpayer—
(i) Intends to make a payment in an amount that exceeds the fair market value of the goods or services; and
(ii) Makes a payment in an amount that exceeds the fair market value of the goods or services.
--- End of Excerpt ---
http://goo.gl/EkdFcx
You did not explain that you intended to make a payment in an amount that exceeds the fair market value of the dancing services, but, if that was the case, then the excess can be treated as a charitable contribution by following the rules below that section, in subsection (i)
You would need to obtain an acknowledgement of the donation from the charity.
http://goo.gl/Lrar7q

The corporation contracting with the dance company would be subject to those regulations also.

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

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

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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 Harvey108@hotmail.com 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 "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

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.

Education/Credentials

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

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


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