Q&A: How Should Items Donated for a Silent Auction Be Treated for Tax Purposes?

Items donated to a silent auction are treated the same as other noncash contributions to the church.

My church is planning a silent auction to raise money for a missions trip. What should we say to potential donors to help them understand any tax implications for their donations—whether it involves a donated item, a service, or, say, the use of a vacation cottage for a week?

Items donated to a silent auction are treated the same as other noncash contributions to the church. Under current federal tax law, donors are responsible for determining the value of their noncash gifts and the proper amounts to deduct as a charitable contribution. Unfortunately, no charitable contribution deduction is allowed for donated services or for a gift of the right to use property (such as the use of a vacation cottage).
Donors who contribute noncash items valued at more than $500 must generally file a Form 8283 with their tax return. Depending upon the type of item contributed and the amount claimed as a deduction by the donor, the donor may be required to obtain a church official’s signature on the Form 8283 confirming receipt of the donation.
If, within three years of the date of the contribution, the church sells, exchanges, or otherwise disposes of a donated item for which it signed a Form 8283, the church is required to file a Form 8282 with the IRS within 125 days. A copy of the Form 8282 filed should be provided to the donor.
Special rules apply to contributions of vehicles (cars, boats, or airplanes). See IRS Publication 4303 for more information on vehicle donations.
The contribution acknowledgment issued by the church to the donor should include the date of the gift, a description of the property donated, and a statement that the donor received no goods or services in exchange for the gift (if true). If the donor received goods or services in exchange for the gift, the acknowledgment should indicate the value of items received by the donor and a statement noting that federal tax law permits the donor to deduct as a charitable contribution only the excess (if any) of the amount of the gift over the value of items received in exchange.
The church is not required to, and should not attempt to, provide the value of a noncash gift on the donor’s acknowledgment. The church may acknowledge gifts of services or the use of property, but should indicate on the acknowledgment that such gifts are generally not tax-deductible, and the donor should consult his or her tax advisor regarding the tax implications of such a gift.
Chapter 8 of the Church & Clergy Tax Guide provides further information regarding charitable contributions.
Kaylyn Varnum is a partner and the assistant national director for tax services at Batts Morrison Wales & Lee (BMWL), an Orlando-based national CPA firm serving churches and nonprofits. Varnum’s primary responsibilities involve serving and advising tax-exempt organizations.

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