I am donating a wine focused dinner for a charity auction. Each individual wine is under $250 value ($100-150 each) and in aggregate it adds up to ~$900 of value. This value is based on wine-searcher pro “lowest” listing and all bottles have a few listings. If I add in the value of tax and shipping, it goes up to ~$1000. The value of the meal will be another $900 or so, on top of the wine value. So as an aggregate donation this is < $2,000, and individual wine bottles are < $250 each.
The questions are:
What is deductible for wine value: what I paid (I don’t have receipts, let alone cost of shipping, storage etc.), or is retail value sufficient
Is tax/shipping deductible for wine value
What records/appraisals are required? I have screen shots of each bottle’s price from Wine-Searcher Pro
Is this an itemized donation where every bottle is listed separately on a tax form, or is this an aggregate single item deduction (all bottles + meal)
IRS link is a bit confusing, but suggests no additional forms may be needed:
You deduct the full current value. No different that if you donated a stock that had appreciated in value. At this total dollar value the irs may not really care. If it was $10,000 or $100,000 they may take notice.
I think we have a tax expert here, and she may opine, but I think—and I’m no expert—it’s based on what you bought it for and not what it’s worth, contrary to what one would think. Basis, not appreciated value.
The Related-Use Rule: Income tax deductions for donations of artwork, collectibles, wine collections, watercraft, and similar tangible personal property are limited to your cost basis unless the donated personal property is related to the charity’s tax-exempt purposes.
Stocks are marketable securities, not collectibles. Over $5k and you need an appraisal.
Ask your tax advisor or the charity that you’re donating too. Or invite a certain someone to dinner.
We donate wine to various charities frequently. Probably five to six cases a year total. My accountant uses cost. Sometimes I buy it specifically to donate (in the case of wine pulls mainly) so that is an easy receipt to have for documentation. Otherwise, I use the cost I’ve put in CellarTracker. He actually loves it because I can pull a list of all wine donated out of CellarTracker and export it to him along with the corresponding donation receipts from the qualifying charitable organization.
I learned about the Related-Use Rule AFTER I donated a highly sought after bottle of bourbon to a non-profit a couple years ago - thought I would get a nice tax deduction, but, um, no.
Between the standard deduction for couples going up so much, and expenses like state taxes, mortgage interest etc. being capped, it seems like the charitable deduction is basically phased out for many filers.
I seem to remember at one point when people were abusing the estimated value of donated cars, the IRS started seeing what charities were doing with the cars, and if they were auctioned/sold, the donee tax deduction was capped at what the charity had received from the net sale proceeds.
That would seem to be a risk in OPs situation if they are claiming $900 in charitable deductions, and hypothetically, the dinner’s auction value ended up being $600 or what not.
Sadly the IRS has been gutted by lack of funding. Unless there’s something else in your return that would trigger an audit, you can deduct using whatever method you want.
Yes, funding is down a bit (still almost $12 billion) as are positions. But collections are up as is tax paid per capita. Cost of collections is lower too. I think this has more to do with the electronic filling requirement than anything else. There are not as many low-level paper shuffling positions needed with mandatory electronic filing these days. And this has been the trend across the past two administrations.
No doubt electronic matching is a huge help, especially for compliance around low to moderate income tax returns. The percentage of audits has been on a steady decline for years. From everything I read, the declining funding is penny wise and pound foolish.
The way the related-use rule makes sense to me conceptually is that the appreciation in value sure looks like income (well, capital gain to be precise) that balances out the deduction. It’s one thing if you drink it, of course, but if you are going to convert it to dollars, either by selling it or taking a deduction at its full current value, then you would have to also recognize the increase in value from purchase to disposition as income, in order to be fair and consistent.
The other kicker I seem to recall from when this came up on another board a decade or two ago is that wineries get exactly zero deduction for bottles they donate. Of course, they still get to deduct the full cost of growing and making the wine from the revenue they made from selling the (now smaller by the quantity donated) wine they bottled, so there is a deduction in there somewhere, but it comes out the same as if they’d just kept it in the “library,” or drank it themselves.
At least, that’s how I understand it from a bunch of winos posting tax commentary on the internet. Consult your tax professional.
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