Anyone tax savy that can give me their two cents?

[jlq39]

I run a small business as a sole proprietor. Its related to the marketing field. I've been asked for my business to donate a portion of ad space, which is normally valued between $500-$1,000 to a 501(c) non profit organization. My question is, while i'm going to do it regardless because I do support this cause, would there by any tax deduction opportunities here?

[Raybo]

It is unclear from your post if you are donating money to buy ad space or buying ad space for your business and using a portion of that ad to display something about the organization.

Clearly, if you are donating money, it is deductible. It seems hard to imagine that sharing an ad with a non-profit would be something you could write off. Mainly because it would appear that your are trying to get business by sharing the ad. If they were 2 separate ads (you buy an ad for the non-profit in addition to your ads but not in the same physical space), then that might work.

I wonder if you could donate $$ to the non-profit that would then turn around and pay you a fee for inserting their message into your ad. If the $$ didn't match and were not at the same time you could maybe get a tax deduction and lower expenses. Example would be you give, say, $2,000 donation to non-profit on Jan 1. Then, over the next 12 months, they pay you $300 every quarter for you to add their message to your ad. That might work, if the donation isn't tied to the ads in any way.

I am not an accountant or enrolled agent and know nothing about the legality of the above advice. Don't depend on it.

[jlq39]

Hi Raybo,

Sorry if I didn't make things clear enough. Basically, the non profit wants me to "donate" the ad space on a vehicle of mine. If this were a paying customer wanting me to place the ad, I would charge them $500-$1,000, but since this is a non-profit, i'm looking to help them out. My question was just from a business prospective, would I able to take any kind of deduction since they are a non-profit and not paying me any cash for the ad.

I know if I were donating them cash, then I could take a charitable deduction for that. Since this involves me donating "ad" space, just trying to understand how that would be treated any differently. The ad space they would be using does have a value.

Thanks.

[jared]

No charitable deduction because no property or cash is being donated.

[camiboxer]

No charitable deduction because no property or cash is being donated.

I agree with this and just had a similar conversation with my accountant. I am a sole prop. and charge $X amount for services. A neighbor is ill and I provided services to her for free. I am unable to write off what money I would have earned had I filled her time slot with a paying customer. I lost money by giving the services away but helping someone out who needs it is a better reward than any dollar amount could be.

[btenny]

I have heard some savy people donate $X to charity and then ask the charity to give them back say 50% of $X as a fee for their services. This then satisfies both needs. The provider gets a nice tax deduction and the charity gets some services for a great rate.

I also have heard about an "enhanced version" of this trick that is also used for rich people. It goes something like this. They buy a special car/artwork for big bucks ($X) and then donate it to charity. The charity then auctions off the car/artwork at some event where the donator gives a speech or plays some music or organizes the event and gets paid for his time, usually a good percentage of $X. Then for the auction the artist/celebrity many times buys back the car/artwork. Everyone wins. The artist gets a 2.x times the cost of the special car/artwork tax deduction for his special car/artwork. He still gets to keep the car/artwork. The chartity gets a big donation of money.

Of course I have only heard this as casual talk so who knows for sure.
Bill

[grabiner]

No charitable deduction because no property or cash is being donated.

I agree with this and just had a similar conversation with my accountant. I am a sole prop. and charge $X amount for services. A neighbor is ill and I provided services to her for free. I am unable to write off what money I would have earned had I filled her time slot with a paying customer.

However, you got the same benefit as if you had a tax deduction; you didn't earn the $X, so you don't pay tax on it. If you instead charged her the regular $X, but donated the $X to a charity which happened to pay her expenses, you would have the same taxable income. (The IRS will not allow a charitable deduction for the benefit of a single individual, so the equivalence doesn't work out if you gave her the $X directly, or gave it to a charity with the specification that it be given to her.)

The OP is in the same situation. If he sold the ad space for $1000 and donated $1000 to the charity, he would have no net income, and the charity could then buy the ad space at the regular $1000 rate. Instead, he will give the ad space to the charity and have no net income from the deal.