Discussion:Donation of Website
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Discussion Forum Index --> Basic Tax Questions --> Donation of Website
Discussion Forum Index --> Tax Questions --> Donation of Website
| 24 July 2008 | |
| My client is donating the creation and design of a website to a non for profit organization and wants to know the value of their deduction. The website has a fmv of $25,000 (what they would bill normally) and their costs of creating it is $10,000. How do I handle the deduction. Do I show the difference of FMV vs Cost as the donation? Not too sure on the deductibility of something like this.
Thanks | |
| 24 July 2008 | |
| So I should just treat it more like they did the work and someone stiffed them on the bill since they are cash basis. take the COGS deduction as direct expense and not worry about donation? | |
Www.cpa1.biz (talk|edits) said: | 24 July 2008 |
| I would do as one other accountant said and charge them the bill. Make them pay you and donate the money to show a full tax deduction. Would any of you contest to this? | |
Www.cpa1.biz (talk|edits) said: | 24 July 2008 |
| I would do as one other accountant said and charge them the bill. Make them pay you and donate the money to show a full tax deduction. Would any of you contest to this? | |
| 24 July 2008 | |
| I'm sorry, I'm still learning here, but wouldn't that result in no benefit at all?
He has to report the income then writes it off? So what? | |
| 24 July 2008 | |
| Well...if he is bartering services, then essentially he had income if you read the definition of income from IRS. Then, he takes the deduction for the expenses as a charitable donation. The "cost" as Kevin stated is the charitable donation; the perceived or constructively earned income is what he should report as income whether or not he is bartering...he is bartering for a charitable donation....my take on it only :) | |
| 24 July 2008 | |
| I don't see a barter here - nothing in the original post indicated that he received anything in exchange for producing the website. If this is a sole proprietorship and it is a true contribution with nothing received in return, he has a Schedule A deduction. If he gets anything in return of a promotional or advertising value (e.g., the website prominently has his name as the creator)he may have a schedule C deduction for the costs.
(I'm assuming that this is a charitable organization. The original post only refers to "non-profit". Not all non-profits qualify as charitable organizations for which charitable deductions may be claimed.) | |
| 24 July 2008 | |
| Then in essence he can only take the value of goods and not the value of services. I thought "bartering" since he was valuing the site as the cost not only of the goods but also services. He is donating the cost of "creating and designing"...are these not services? | |
| 24 July 2008 | |
| I think we agree but just to clarify - he can't claim the value of the goods, he can claim the costs he incurred. As he doesn't mention what the $10,000 in costs are, it's difficult to comment on them. | |
| 24 July 2008 | |
| Glad we agree!!! Us Floridians stick together!!! hehehe
And as well I mispoke (imagine that...hehe). No the value of the goods is not taken, the costs to him of the goods Purchase of website name Cost to pay for server to accommodate the site Cost of supplies needed to produce the site These costs are so minimal that 10K for these costs seems to be high. I think the "costs" poster is referring to are costs of creation and design...but only my opinion.... | |
| 24 July 2008 | |
| Agree with Kevin and those that said you only get to deduct your out of pocket costs and not the fmv or value of labor.
Agree with above that there might be the ability to write off some of it on sched C if you could show an advertising purpose to the donation. Disagree with the idea above that you should have client get paid for the project and then give the money back for the deduction. Aside from the extra hassle you would also end up paying social security tax on the income. | |
