Discussion:1099 for 501(c)(3) raffle
From TaxAlmanac
Discussion Forum Index --> Basic Tax Questions --> 1099 for 501(c)(3) raffle
Discussion Forum Index --> Tax Questions --> 1099 for 501(c)(3) raffle
| 3 July 2009 | |
| My client, a local Rotary club with a 501(c)(3) determination, is conducting a 2010 Ford Mustang raffle. 500 tickets are being sold at $100 apiece. I am aware that there needs to be tax reporting for the winner of the raffle, presumably on 1099 or W-2G, and the FMV of the vehicle must be reported.
My questions are as follows: (1) The vehicle has a sticker price of about $38,000, and a cost to my client of about $35,000 (dealer invoice cost; dealer kindly is selling to the charity at cost). Is there any basis for listing the value as $35,000 on the 1099, or must it be sticker price? (2) Does the answer to (1) change if the vehicle has, say, 200 miles on it when awarded? Can some reduction in value be considered on the 1099 for the fact that mileage is more than negligible? (Even though it's still technically a new car?) (3) My sense is that withholding is required, and I have seen conflicting rates of 25% or 28%. Let's assume we get a valid W-9 so no backup withholding is required. Which rate is it, and is it absolutely required, or is my client sufficiently safe simply issuing a 1099 without withholding? (Withholding is a bit of a challenge when you're awarding non-cash prizes.) Any thoughts, opinions, comments, or advice is much appreciated. Thanks. | |
| 3 July 2009 | |
| First - Rotary International and any division of it is NOT a 501(c)(3) entity.
It's a business organization that's 501(c)(6). Donations to the Rotary Club are NOT tax deductible as a charitable donation. Second - The 1099 should be reported at the LOWER of cost of FMV. Since cost is $ 35,000, that's what the value for 1099 purposes should be. As far as withholding rate - that really should be worked out with the winner. I don't believe there is a specified rate - unless another poster finds evidence to show otherwise. | |
| 3 July 2009 | |
| FMV is the amount for the 1099-MISC and withholding is 28%. For non-cash prizes the winner needs to write a check before the car is released. Sucks for sure but those are the rules. Publication 3079 covers the rules.
BTW, since when is dealer cost $3,000 less than sticker price? Particularly on a popular model like a Mustang? | |
| 4 July 2009 | |
| Sorry Uncle Sam but you are wrong on this one. Many Rotary Clubs, including the one I belong to and prepare the 990 tax returns, have 2 separate reporting entities. One would be the local club itself 501 (c) (4) and often a Foundation entity 501(C )(3) established for fundraising and then donating proceeds to local charities . | |
| 4 July 2009 | |
| Yes - the FOUNDATION is 501(c)(3)-but the Club itself.
The original post said "Rotary Club with 501(c)(3) determination" | |
| 4 July 2009 | |
| The club in question is a 501(c)(4), and it is affiliated with a separate 501(c)(3) charity which is conducting the fundraiser. Very common for Rotary clubs. I wasn't specific in the original post, but it wasn't relevant to the question. | |
