response 18 of 72:

Jul 22 12:35 UTC 1998

A clarification on Rane's comment:

   Grex is not responsible for determining the fair market value of
   good and services donated to Grex.

   Grex is responsible for determining the fair market value of goods
   and services given by Grex to users.

This is confusing in the case of auction items.

I think T-shirt and mug purchases are not deductable at all.

response 20 of 72:

Jul 22 16:12 UTC 1998

On auctions, my guess is that we need do nothing if the item sells for
$75 or less.  If it sells for more than $75, we probably have to come up
with a "fair market value" for the item and send a receipt to the buyer
stating that value and saying anything above that value should be
treated as a donation.  I'm far from sure about this though.

response 22 of 72:

Jul 23 05:59 UTC 1998

Why do you think we shouldn't write to the IRS, Rane?

response 24 of 72:

Jul 23 18:16 UTC 1998

You should not write the IRS because they will not take the time to look
into the specifics of your situation, and usually just quote the book (and
then the part of the book that maximizes their return). If this were a
serious matter, a competent tax attorney is a better bet (they rely on
return business - not something the IRS worries about). But the instructions
are so clear in this case that one can hardly go wrong following them.

response 26 of 72:

Jul 24 05:08 UTC 1998

I think Rane's point is that the response from the IRS is not an official
ruling.  That's probably something an accountant with a good understanding
of 501(c)3 tax law would be better qualified to answer.

response 28 of 72:

Jul 24 11:24 UTC 1998

Hmph.  Rane's convinced me on this one.

Re 23: The value of a Grex membership, over and above what any user gets, is
indeed pretty minimal.  The fair market value of the right to vote and make
motions in the governance of Grex is, IMO, zero.  The internet access is not
absolutely worthless, but given that most users, including almost all
non-local ones, have better access which they use to get to Grex in the first
place, it's hard to see that as a high-value item.  Remember that web access,
such as it is with lynx, is available to all users, as is email.  How
many ISPs even sell accounts with *just* telnet & ftp access to the web?

We've always stated up front that the main benefit of Grex membership is
knowing that you're helping to keep this system available to all.
The claim that we're seriously in the business of selling internet access,
or Wizard In Training manuals, is pretty laughable.

response 30 of 72:

Jul 24 16:28 UTC 1998

Rane:

  - I agree that we do not assign "fair market prices" objects donated.
    That is up to the donor.  We are responsible only for determining
    the fair market value of things we sell.

  - I disagree that auction purchases are never deductable.  Last year
    Mark paid $60 for the "Grex Bat," a completely imaginary item.  I'd
    say that was 100% deductable.  We regularly have essentially
    worthless trinkets being bid fairly high for the shear fun of it.
    I'd expect "Pandora's Mystic Box" to go for about 50 cents in a
    garage sale.  Bids are much higher than that and are probably
    mostly deductable.  There is currently an apple pie going for $25.
    It's a great pie and I may bid it up some more, but that's probably
    double what any reasonable accountant would call the fair market
    value.

    While it is true that many auction items go for prices at or below
    their fair market values, it is also true that people quite often
    pay more for things than they usually would because they want
    to support Grex.  I don't think a "no auction items are deductable"
    rule works across the board.

Dave Cahill:
    The right to vote and make motions has no value as far as the IRS
    is concerned.  They are only interested in the "services" that
    members get.  Luckily the IRS's idea of worth is not like anyone
    else's.  For example, your donations to your church may help save
    your soul, but the IRS thinks your soul is worthless, so it is OK
    to deduct the full value of those donations.  In normal human
    parlance, "fully tax deductable" is not equivalent to "worthless."

    My (very unexpert) guess is that Arbornet's patronships are not
    fully deductable.  Their price is above the $75 cut-off and they
    have more benefits.  It's probable that they could be partly
    deductable, because I think the fair market value is lower than
    the price.

Dave Lovelace:
    My understanding of "fair market value" is that it is not "what the
    average person would pay" but "what some person would pay."  I
    think there are actually people who buy Grex memberships for no
    other reason than to get the services.  My guess is that there is
    a small, but real population of people who would pay several dollars
    a month for those benefits.  This is why I'm reluctant to try to
    defend the full deductability of Grex memberships on the basis of
    the "de minimus" exception (which is used for bookmarks, bumper
    stickers and address labels that charities send you).  I think
    the "frequently exercisable" case works better.

At the last meeting, the board approved renewing our membership in the
Accounting Aide Society.  We may be able to get some more expert advice
on this from them.

response 32 of 72:

Jul 24 20:06 UTC 1998

Re #30: in every case, if Grex can say that nothing of value was provided
in exchange for the donation, the donation is deductible. No one would
consider the auctioning of a "grex bat" however as providing something
of value in exchange for the donation.

Markets work by competitive bidding. If someone wants something badly
enough, they will pay a high price for it. There is no *inherent* value
in an item except what someone will pay for it. Who can say that someone
paid more for an item in an auction than that item cost is paying it
because they want it, or because they want to make a donation? Which
assumption do you think the IRS will adopt?

A possible interpretation is that trinkets or items of small cost value
are being given as a gift to the person making the largest donation for
it. (Call it an auction if you wish...but not to the IRS?). There is
a term for that kind of 'value'. So, I will concede that there is probably
some way to proceed to acknowledge some of the amount paid in an auction
to be deductible, but I'd like to see the rules documented and tested. 

response 34 of 72:

Jul 28 15:03 UTC 1998

I think your analysis is correct, Jan.

response 36 of 72:

Aug 2 04:31 UTC 1998

it is precisely because of the GrexBat and items like it that I think it 
is important for us not to send out the (incorrect) message that the 
purchaser cannot deduct the price in excess of the fair market value. 

Let's just say that the purchaser can deduct that difference, if any, 
then. It becomes the purchaser's responsibility to argue the FMV with 
the IRS, should they audited. We have no responsibility to set it, as we 
would if it were something we were providing. like a subscription.

response 38 of 72:

Mar 26 23:00 UTC 1999

National Charities Bureau (after a long period of telephone tag) put me on
the phone with one of their 'analysts', who had never heard of any rule that
nonprofits have to send out receipts for all donations.  She only knew that
people who itemize taxes are supposed to provide written proof:  cancelled
checks are allowed for amounts under $250.  I asked if she had heard about
any $75 rule, and she will check and call back Monday morning.

In the section on Contributions (Recordkeeping).  "Generally, if you make a
charitable contribution that is more than $75 and is partly for goods or
services, the organization must give you a written statement that you should
keep".

I presume you only have to keep this statement if you are itemizing. 
The only logic I can think of to this would be if the organization also kept
a copy, and if a donor were audited, they might be asked to show it in case
someone was claiming, for instance, to have donated $100 to grex when part
of this was for a t-shirt, handmade envelopes, or homemade quiche.

I would therefore think that written statements for amounts over $75 would
only need to be provided to people who had purchased some goods or services
for part of this amount, and thus not to people like me (who contribute to
the auction with goods and services but have not bought anything).  This might
cut the list in half.   Plus send paper receipts to anyone else who requests
them (in case they are itemizing and don't get checks back or donated $250
or simply want to receive mail from Mark.)

I can also look online for Publication 526, Charitable Contributions (but I
think last time I looked it was long and complex and not helpful).

I will let you know if the National Charities Bureau comes up with anything.

response 40 of 72:

Mar 28 01:55 UTC 1999

But the only people who know whether paper receipts are actually required are
the donors themselves.  No way the treasurer would know whether they were
itemizing, and if so, whether they got cancelled checks back, and I can see
no reason for the treasurer to waste time writing out, addressing, and mailing
paper receipts to people who don't itemize or who get back cancelled checks
and have donated under $250.  It would seem a lot less total work for those
few people who want receipts to request them by email, than for Mark to write
out a bunch of paper receipts to people who don't want them.
        I will ask the IRS if that $75 figure is per 'contribution' or for the
entire year.  I doubt that there are many auction sales of individual items
over $75.  (Other than that computer that scg was outbid on.)
        People who find electronic communications to be less meaningful than
paper communications (emailed receipts instead of handwritten and
snail-mailed) are unlikely to be involved very heavily with a computer bbs.
I cannot see how an email thank you is worth less than a paper thank you if
you don't need the paper version for tax purposes.

response 42 of 72:

Mar 28 11:50 UTC 1999

I also don't think an emailed thank-you notes carry the same good feelings
that a handwritten, or at least a hand-signed note does.  If I were
treasurer, and this wasn't a huge use of my time, I'd think of it as a
worthwhile gesture.  The few people who didn't want paper receipts
wouldn't get them. 

Mark is going a great job here.