Silent Auction Fundraisers

Christian Shaeffer Exempt Non-Profit Organizations Leave a Comment

Silent Auctions are a common fundraising activity for non profit exempt organizations (NPO).  They typically include two separate transactions, and it’s important to handle and track them correctly.   Here are some helpful guidelines for accepting donations of goods (commonly called ‘in-kind’) and receipts for the winning bidder.

Part 1 – Donors of in kind goods to a silent auction shall receive a tax receipt from the NPO that includes a description of the donated item.  While no monetary value is placed on the receipt, the donor must inform the NPO of the fair market value (FMV) of the item.  (This information is needed for the winning bidder’s tax receipt.)   See the previous post for more information regarding recording and receipting for in-kind donations.

Part 2 – A common misconception with silent auctions is that many bidders think the entire purchase price is deductible.  Winning bidders who purchase items at the Silent Auction are actually engaging in a quid pro quo contribution.  Generally, only the  purchase price paid above the FMV of the item is deductible as a charitable contribution. Compliance with the Internal Revenue Code dictates that the NPO’s shall issue receipts to the winning bidder at the time of the purchase.  The receipt should include the description and amount of the purchase, along with the FMV of the item.

And keep in mind, while it doesn’t directly affect the NPO, it’s good to remember that the donor’s in kind charitable deduction in Part 1 is limited to the donor’s tax basis in the item, not necessarily the FMV.  A common example is donated works from artists including painters and photographers – technically these are not deductible at FMV to the artists!  Also, for part 2, while it may seem counter intuitive, it probably makes sense to be conservation on the FMV’s listed for each item (in order to maximize donor deductions).

Be sure to check with an experienced CPA regarding your specific fundraising questions!

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