Gifts in Kind - Services Rendered 0055-88 --- ZZall

                                             - - - Rejoice in the Lord always ... again I say Rejoice !!! - - -

                            TO: Interested Ministries                                                                                                             FROM: Jim Bramer, Retired Auditor-CPA
                                                                                                                                                                                      FILE: 0055-88/all

                             RE: Gifts in Kind (GIK) - Services Rendered                                                                           Originated: September 2002

     Below is a hypothetical Online Email thread (THRD) between any one of the following MFTeam members: PAT (Ministry Chief Executive), LEE: (Ministry Volunteer Treasurer), or FRAN: (Ministry Computer Bookkeeper) and   Jim@bcidot.org

FR FRAN:

    Jim, thank you for the tangible "Gifts in Kind" (GIK) and deductible contribution information that you shared with me in 0055. where we discussed tax deductible donations at auctions ..... or real property and related issues.
         My question now has to do with gifts of "services rendered" .... or someone provides their valuable business time that they would ordinarily bill us, etc. If we know what they would ordinarily charge for such services .... let's say $500.00 .... is that tax deductible?

FROM ; Jim@bcidot.org

       The answer is no - a charitable contribution tax deduction is not permitted under these circumstances.
       Also, let me share the following scenario:    You are building or repairing/updating your Facility. A gracious contractor named Joe, who operates via a corporation known as ABC Contractors, agrees to charge you only for the costs of the materials/sub-contractors, but not for any labor - some of which is his personal time. The governments (Federal and States) specificly prohibit ABC Contractors from taking a charitable contribution tax-deduction for the market value of such services.

FR FRAN:

        OK ..... let me take ABC Contractors and suppose the following specifics:
        We understand that ABC Contractors would normally bill $28,000 for the work they provided us. Their actual cost was $19,500 for Materials/sub-contracts and the actual Labor cost them $3,050, or a total of $22,550. ABC Contractors billed us and we paid $19,500. Seemingly a donation of $8,500, or the difference between $28,000 less $19,500.
       Would it not work for us to give ABC Contractors a check for $28,000 and they turn around and give us a donation check for $8,500.

FROM: Jim

       It is possible, but this way they would have to report for tax purposes a unrealized net Income on that job of $28,000 less $22,550, or $5,450. Then take a charitable gift deduction of $8,500, as permitted by certain annual ceilings, etc.
       From my perspective, the cleanest way is for ABC Contractors to simply write off the $3,050 ($22,550, less $19,500) as a business loss/deduction and NOT mess around with the above steps.

FR FRAN:

Thanx, Jim --- I think I get the options and their respective value.

The bulk of this Publication originated in September 2002 and was . UPTD: May 03, 2008

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