Q: Our youth group hosted a spaghetti dinner to raise money for hurricane disaster relief. How do we determine what is a donation and what is payment for the spaghetti dinner, or can a donor’s entire check for the dinner work as a tax-deductible donation?
A: If the understanding with the participants was that the “price” of the dinner was a donation of any amount, the Internal Revenue Service considers this to be a quid pro quo arrangement. Under such an arrangement, the value of the dinner (not the dinner’s actual cost) is what you use to determine the nondeductible amount. In making that determination, the law allows you to make a “good faith estimate.” For instance, you could say that the value of the dinner is worth what a comparable meal would cost at Fazoli’s.
However, if the understanding was that it was a free dinner and an “ask” was made for contributions at the dinner, it is not a quid pro quo arrangement, and the entire amount donated by each participant is tax deductible.