Terrie on
Nonprofits ©
October 2005
Bidding on a Parking Space Provides
Double Bang for the Buck
Q:
We have an annual fund raiser at which we auction
off a reserved parking space. The winner gets exclusive
rights for a year to a space that has a reserved
marker in his/her name. Parking here is free, but
spaces are often at a premium. Bidding is fierce
and the space has gone for up to $15,000. How much
of this is tax deductible?
A:
People pay $15,000 for a parking space? I can see
a lot of development officers making a mental note
to add parking to their list of auction items!
Anyway,
it’s good news for the winners. My source, CPA
Sherry Reed at Lancaster & Company says that
as long as no legal title or other rights are given
to the successful bidder, the organization is a
qualified organization as described in Code Section
170(c)* and parking is normally free it all would
be deductible.
This
is just another twist on the familiar deductibility
formula where the allowable deduction is the amount
paid above the fair market value for the goods or
services involved. Erecting a sign that grants
exclusive right to park in a space that is normally
free would be considered a “token” benefit not necessitating
a reduction in the value of the donation.
The
answer changes if while most of your parking is
free you do charge for premium spaces and this is
a premium space. In that case the person’s donation
would be the portion of the winning bid that is
in excess of the price normally charged for premium
spaces.
In
either case, if the winning bid exceeds $75 the
organization must provide the donor with a written
statement that clarifies the law – i.e., that the
deductible portion is only that which exceeds the
fair market value of the goods or services received
– and includes a good faith estimate of the value
of the parking space – i.e., free or the customary
price for annual parking rights.
____________________________
To
confirm that your organization is qualified, go
to http://www.irs.gov/charities/charitable/article/0,,id=134331,00.html
Terrie
Temkin, Ph.D. is an internationally recognized governance
and planning expert. She is president of NonProfit
Management Solutions, Inc., a principal in CoreStrategies
for Nonprofits, Inc., and a longtime member of AFP.
Contact her at terriet@nonprofitmanagementsolutions.com,
954-985-9489, or 866-985-9489.
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