On Nonprofits ©
August 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 |
