posted on September 19, 2001 07:06:06 PM
AND IT GETS WORSE AND WORSE, JUST LIKE I THOUGHT....
AS I SAID, and eBay below seems to agree, contributions are NOT cash contributions. And whose comment was it that ebay would issue receipts? In the wake of the below, how? And now tell me... Say you donate a widget. it grosses $50, You paid $10. You deduct $10. UMMM, who do you think gets to deduct the other $40 CASH contribution???? So much for spouses.
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Tax Issues
The IRS and eBay’s advisors have teamed up to provide Auction for America participants with the following general information concerning the deductions of contributions to the Auction for America efforts:
If you claim itemized deductions on your tax return, you may be entitled to a charitable contribution deduction for your participation in Auction for America.
<<<May if you donate to the tune of (if I remember properly at least 15% of your Adjusted Gross Income...>>>
If you donate an item of tangible personal property, the amount of your deduction is limited to how much you paid for the item or its fair market value - whichever is less. You should describe the item being sold and include (for tax purposes) a good faith estimate of its fair market value as part of the description. Items of tangible personal property include personal effects (like a watch or furniture), collectibles (like an antique or sports memorabilia), or something you have created (like a quilt or a painting).
What this means under the tax law is that if you paid $10 for an item that you contribute when it has a fair market value of $25, your contribution deduction is limited to $10. You will be entitled to a deduction only if the item is sold, and the $10 limit applies no matter what the item is sold for.
<<<This is NOT true if you list it as capital gains property on the Capital Gains IRS form. THEN you can claim fair market value. And long term Capital Gains are generally taxed at a lower rate, so it could be worth it to claim the profit, then deduct it. Like I said, eBay is NOT the Government or the IRS...>>>
There are other rules to keep in mind. For example, if you donate property and you are claiming a deduction of more than $5,000, you need to get an independent appraiser to confirm that value. The appraisal must satisfy a number of specific requirements under the tax law. Also, there are limits on the total amount of charitable contribution deductions that can be claimed in any one year.
In general, if you purchase an item, you may claim a charitable contribution deduction equal to any excess of what you pay over the fair market value of the item you have purchased.
The tax laws for charitable contributions can be complicated. If you have any questions, we urge you to contact your tax advisors. For more information concerning the tax rules that may apply, you can also visit the IRS web site for further information on IRS Publication 526 (charitable contributions) at www.irs.gov/forms_pubs/pubs.html.
posted on September 20, 2001 03:25:58 AM
This is quite a confusing tax problem. If the donation is of the item, who did you donate the item to, eBay or United Way ?
However, this AFA looks more like a cash donation, that is, the donor (seller) is donating the proceeds from a sale, as well as the shipping costs.
But, if it is a cash donation by the seller, then the buyer gets no tax deduction for the price paid above fair market value.
If it is determined that the seller is donating the item, the seller may only deduct the Fair Market Value, while the buyer can take the duduction for price paid over Fair Market Value.
The whole problem here is that it doesn't appear that the seller is actually donating the item for THE CAHRITY TO ACTUALLY AUCTION OFF. There is nothing constituting the transfer of ownership of the item to the charity. The only transactional evidence of donation by the seller is the CASH payment donated for the item through Billpoint.
At first blush, this AFA auction is a cash donation by the seller, and the buyer has no deduction available.
If you want to be real slick, if your AFA item doesn't sell, you can still take the FMV off your taxes if it is found that the sellers donated "items" for the auction and not the cash.
If your item doesn't sell, you can still claim you donated the item to the UW through eBay and take the deduction, but eBay/UW haven't taken possession of the item(s)yet.
posted on September 20, 2001 05:15:59 AM
<<<This is quite a confusing tax problem. If the donation is of the item, who did you donate the item to, eBay or United Way ? >>>
That's a VERY good question.
<<<However, this AFA looks more like a cash donation, that is, the donor (seller) is donating the proceeds from a sale, as well as the shipping costs.>>>
No, the mechanism is clear, it's a donation of the item. Billpoint donates the cash.
<<<But, if it is a cash donation by the seller, then the buyer gets no tax deduction for the price paid above fair market value.>>>
Right.
<<<If it is determined that the seller is donating the item, the seller may only deduct the Fair Market Value, while the buyer can take the duduction for price paid over Fair Market Value.>>>
If the seller was actually donating the cash, cash has no FMV, the buyer would theoretically be donating nothing.
<<<The whole problem here is that it doesn't appear that the seller is actually donating the item for THE CAHRITY TO ACTUALLY AUCTION OFF. There is nothing constituting the transfer of ownership of the item to the charity. The only transactional evidence of donation by the seller is the CASH payment donated for the item through Billpoint. >>>
Right.
<<<At first blush, this AFA auction is a cash donation by the seller, and the buyer has no deduction available. >>>
Like I said, the seller is donating the item, the buyer is donating the cash that he/she paid for it over and above FMV.
<<<If you want to be real slick, if your AFA item doesn't sell, you can still take the FMV off your taxes if it is found that the sellers donated "items" for the auction and not the cash.
Proceeds have to go to defined IRS charities to be legal deductions.
If your item doesn't sell, you can still claim you donated the item to the UW through eBay and take the deduction, but eBay/UW haven't taken possession of the item(s)yet. >>>
Proceeds have to go to defined IRS charities to be legal deductions.
All this is not really the point, and with the tons of posts I've been spouting, it appears that noone has asked the one major question whose answer may be damning to the cynical, exploitative program, and would eliminate all of these tax questions-
WHY DIDN'T EBAY USE THE MECHANISM THEY ALREADY HAD IN PLACE THROUGH VISA etc. AND THROUGH THE INTERNET ALLIANCE THAT THEY WERE IN THAT CHANNELS FUNDS DIRECTLY TO THE CHARITIES INVOLVED? When someone wants to go to eBay and donate CASH, the CASH doesn't have to go through Billpoint, so why do AFA auction payments? Why ADD another layer of unnecessary beaureaucracy and processing time which will PREVENT the money from getting to where it's supposed to be going as fast as it could???? eBay claims they set this up in a hurry, and they were anxious to roll it out- if so, why make it more complicated (NOT easier) than it had to be???????
posted on September 20, 2001 05:44:36 AM
GreedBay:
Why ADD another layer of unnecessary beaureaucracy and processing time which will PREVENT the money from getting to where it's supposed to be going as fast as it could????
If they are in fact able to get a million a day, for every day billpoint waits to transfer the money they can make at a ARP of 4%: ~ $109.58 in just interest for every day that they wait. Now that is not even a lot of money. But if they are waiting a few days, they probably can make some money in interest...
"In pioneer days they used oxenfor heavy pulling, and when one ox couldn't budge a log, they didn't try to grow a larger ox. We shouldn't be trying for bigger computers, but for more systems of computers." - Grace Hopper
posted on September 20, 2001 05:51:54 AM
<<<But if they are waiting a few days, they probably can make some money in interest...
>>>
That's secondary to the real issue, why use Billpoint AT ALL when you already have a system in place that donates through credit cards directly to the charities involved? On the one hand, eBay says it was in a hurry to set this up so the money would start rolling in and the people affected by the disaster could get it, on the other, they add a HUGE layer of unnecessary beauraucracy that can do NOTHING but slow the process down and make it more COMPLICATED, not easier.
And the answer is-
Maybe-
To get sellers to sign up for a basically FAILING online payment syatem that they own a good percentage of?????
posted on September 20, 2001 06:02:53 AM
And I will reiterate the REAL issue about these "deductions," ESPECIALLY NOW that there is mounting input from TAX PROFESSIONALS on boards and who I've asked myself (many who have nothing to do with eBay) wanting to know how ANYTHING donated to AFA by sellers can possibly be tax-deductible when the IRS has strict rules about what Organizations are eligible to receive tax-deductible contributions. eBay and/or Billpoint would seem NOT to qualify: in reality, what is happening is the seller is NOT donating to 911, he/she is selling to a bidder whose proceedas go to Billpoint who then donate the proceeds to whomever... IRS rules require deductible donations to go DIRECTLY to a charitable org approved by the IRS to receive them. Neither eBay nor anyone else has come up with a satisfactory answer as to why an item donated in this way SHOULD be tax-deductible under IRS guidelines (see IRS Publication 526)....
posted on September 20, 2001 06:52:19 AM
If anyone wants to make a contribution that is clearly tax deductible, make it directly to the Red Cross, http://www.redcross.org
There are other organizations that accept tax deductible contributions, but the Red Cross is the one I personally endorse.
Someone running a business, should consult with their CPA before making significant contributions through the AfA program. There are numerous issues that complicate this, most significantly the documentation of the contribution.
Individuals making contributions through this program may as well just forget writing it off, it's not worth the trouble. Just make the contribution of your genorousity, don't worry about saving a few pennies in taxes. If you want the tax deduction, give direct to the Red Cross.
I pity the people who will have to try to explain all this to the IRS during an audit!
posted on September 20, 2001 10:09:02 AM
Greedbay: As a B&M shop owner, I have to thank you for being willing to tackle this issue from a BUSINESS standpoint!
One issue that has been sidelined also is the fact that TECHNICALLY, if you collect sales tax for your state AND an AFA auction winner is from your state....YOU are now responsible for whatever dollar amount would have been due on the sale! Doubt if a sales tax auditor is going to care that you never saw the money and only had $10.00 tied up in a widget you donated....eBay SAYS you sold it for $100.00 and the state wants their share!
Wanna bet the CPA's are gonna be needin' some extra bottles of booze to sort out all this next April????
posted on September 20, 2001 10:20:29 AM
I don't have a CPA, I don't take write offs for charity, never have, I'll be glad to pay the tax on the item if someone from my state buys it.
posted on September 20, 2001 10:48:33 AM
Lanefamily: I am glad that YOUR financial situation allows you to be able to do that...not everyone is in such good shape this year.
Quite frankly, I believe that may be one big reason that there is so much turmoil with the AFA program.....many of us are paddling hard to keep our heads above water and this poorly thought out scheme could very easily end up HURTING many people who wanted to help without being put in competition with other auctions and almost publicly chastised by eBay for not participating!
I left corporate America over things like 'You MUST contribute to the United Way'...now ebay tells me how I 'must' help THEM with the tragedies of last week or I am not a "real" American and don't get a flag on my auctions?????? So much for unity & community!
That $100,000,000 Meg wants to "donate" so badly would have gone a LONG way to shoring up our economy with the resulting turnover of dollars for replacement inventory and even more sales! Many people would be able to contribute much more if THEIR futures weren't so uncertain!
posted on September 20, 2001 11:39:05 AM
Bottom line from a discussion with a CPA:
SELLERS can not deduct anything as a donation. They are technically "donating" their item to the buyer, not the charity (also true for the shipping amount.) In virtually all cases, the buyer will not be a IRS-recognized charity, so no deduction will be allowed.
BUYERS can not deduct anything as a donation. They are sending cash to Billpoint, not a recognized charity, and receiving merchandise in return. Their receipt is from Billpoint, not the charity (and there will be no way to know which specific charity received the cash based on the receipt). Even if they pay more than what they perceive to be the "fair market value" of the item, it would not technically be recognized as a valid donation (due to Billpoint's involvement) and therefore non-deductible. In many cases (collectibles, antiques, etc), the "fair market value" will be what they paid. In fact, an auction format is often used to establish exactly what a "fair market value" for something is.
In short, the ONLY one that can legally deduct the donation is BILLPOINT (i.e. eBay). They will be making a cash contribution to a recognized charity.
I hope the CPA is wrong, but it makes sense to me. It would be amazing if eBay didn't think this through and messed up the effort??? Has anyone asked for clarification on this specific issue during one of the AFA chats? The CPA believes the information they have on their pages regarding tax deductibility is incorrect.
posted on September 20, 2001 11:47:42 AM
Yes, expenses like shipping would still be deductible AS AN EXPENSE. The COST of the items sold could appear on the "inventory cost" line (i.e. you'd be able to recover your cost, but not any of more of the amount it sold for)
The point was that nothing may qualify as a DONATION. For sellers, costs could be claimed, just not on the charitible contributions line though. For buyers, nothing could be claimed.
posted on September 20, 2001 11:54:21 AM
Yep, ebaypowersellergold, that possibility been one of my concerns from the beginning, and it's so simplistic that I wondered how ebay could have overlooked it, so I thought that MAYBE, they didn't, and they know what they're doing... Like you, for the sellers' sakes that are participating in this, I sure hope so.... The seller is "contibuting" his item to the buyer. The buyer is paying for it by sending money to eBay/Billpoint, a NON-501c entitiy, and therefore ineligible for having anything contributed to it being a charitable contribution. eBay/Billpoint is the entity contributing ALL the proceeds, making it eligible for a deduction of the ENTIRE amount.
