Technical topics regarding tax preparation.
14-Oct-2021 9:56am
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Client donated about 18K in inventory to an organization that is not a 501(c)3. I can't find their name on the IRS charities list (I know it's not updated) nor does their letter about the donation state they are a non-profit. Is it correct that you can only deduct your donations made to a 501(c)3 organization?
14-Oct-2021 10:07am
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Well, it's not a charitable contribution, but why can't you just pull it via cost of goods?
14-Oct-2021 10:18am
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JR1 wrote:Well, it's not a charitable contribution, but why can't you just pull it via cost of goods?
The cost would already have been deducted via COGS.Client had a 2 for 1 deal: you buy 1 item and he would donate the second one.
14-Oct-2021 10:51am
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Did you look at the organization's website? Did you look them up on GuideStar?
https://www.guidestar.org/Sec. 170(c) defines which organizations can receive tax-deductible charitable contributions. It's not defined in relation to Sec. 501, but I know that Sec. 501(c)(19) organization and a limited subset of Sec. 501(c)(4) organizations can receive donations, to answer your question.
I suppose if you can't move the cost of that inventory into a deductible donation expense, then you may have to move it to a non-deductible expense, because I don't suppose they had a business reason for the donation (not ordinary & necessary)?
14-Oct-2021 11:00am
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beardenjv wrote:I suppose if you can't move the cost of that inventory into a deductible donation expense, then you may have to move it to a non-deductible expense, because I don't suppose they had a business reason for the donation (not ordinary & necessary)?
It appears to have been part of a promotion, which is as business reason as it gets. I'd have no issue running the cost of these goods through COGS.
To OP...there's no "double dipping" for this. If you've already deducted it in COGS, stop there. Do not cross 'Go'; do not collect $200.
~Captcook
14-Oct-2021 11:08am
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CaptCook wrote:It appears to have been part of a promotion, which is as business reason as it gets. I'd have no issue running the cost of these goods through COGS.
To OP...there's no "double dipping" for this. If you've already deducted it in COGS, stop there. Do not cross 'Go'; do not collect $200.
I think, but correct me if it's not, what can be deducted as the donation is the difference between FMV (or sales price) and COGS. Client receives a charitable donation deduction for the difference between the sales price and COGS. Result is the same as if he had sold the items. There's no double dipping.
14-Oct-2021 11:10am
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No double dip. And you said above that it's already been written off......which means you're at getting a warm feeling only.
14-Oct-2021 11:27am
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JR1 wrote:No double dip. And you said above that it's already been written off......which means you're at getting a warm feeling only.
You didn't answer my question if it's correct that on the 8283 the FMV minus COGS can be deducted.
Or, if only COGS of the items can be deducted as a donation on 8283, let me know.
The manufacturing cost will only be deducted once on the return, so please have no concern for that.
14-Oct-2021 11:28am
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