Writing off Donations of Discounted/FAR/Points Roll/etc Items?

[AnotherGradStudent]

Continued from the Free Paper thread, but with a more through focus on 'how legal would this be'? Disclaimer: I am not a lawyer, especially not a tax lawyer, and expect that none of ya'll are either (or at least not acting in that capacity on this forum), but I'd appreciate your feedback nonetheless.

With respect to non-cash donations, http://www.irs (dot) gov/taxtopics/tc506.html mentions 'fair market value' (defined further here http://www.irs (dot) gov/publications/p561/ar02.html#d0e139) . For, example, the paper that's FAR from staples going on this week, that seems like it should fall somewhere *between* $0 and the pre-rebate cost (i.e. what I could sell it for on craigslist); I am losing utility/'donating' utility by giving it away. Its not as if me owning the paper devalues it, nor does paper tend to lose utility over time. If I sit on it until after the rebate ends, the FMV should sit somewhere below but not too far below the purchase price.

Reading more thoroughly through http://www.irs (dot) gov/publications/p561/ar02.html#d0e139 , if I consider myself a reseller (which is what I'd otherwise do if I wasn't donating/giving away the items), and assuming I don't wait so long that my inventory becomes obsolete BUT wait long enough that the rebate/promotion/etc ends, I should be able to scale the FMV to ebay/amazon/wherever else I'd move it, under the section:

Inventory

If you donate any inventory item to a charitable organization, the amount of your deductible contribution generally is the FMV of the item, minus any gain you would have realized if you had sold the item at its FMV on the date of the gift. For more information, see Publication 526.​

Thoughts on this interpretation? For a practical example,

1. I bought some Nakamichi Bluetooth headphones by rolling some K-Mart points; the net 'cost' to me was $0/negative
2. I have left these headphones new-in-the-box in a safe location such that they shouldn't degrade/become damaged/lose value in that fashion
3. Checking ebay now ( http://www.ebay (dot) com/sch/i.html?_odkw=nakamichi+BT+headphones&_sop=12&_sadis=15&_dmd=1&_from=R40%7CR40%7CR40%7CR40&LH_Complete=1&LH_Sold=1&_osacat=0&_ipg=50&_from=R40&_trksid=p2045573.m570.l1313.TR0.TRC0.A0.H0.Xnakamichi+BT304&_nkw=nakamichi+BT304&_sacat=0 ), I see that this item has sold for >$30 in the last 30 days

4. I head to my local charitable donation thrift store (proceeds support children with developmental disabilities) and drop off the headphones

Could I claim $30 in 'charitable donations'? I agree that I can't/shouldn't be able to claim the price before rebate/points roll, but it feels like under the Inventory standard above, I should be able to claim $30.

Obviously, the yearly net total from this still isn't going to add up to a whole lot, and at the end of the day I could make more money by reselling, but the appeal of walking into my local Alpha Thrift with a big 'ole bag of new-in-box electronics and walking out with a slip saying I've donated $X of value (which is how my local Alpha Thrift/Resource center works) is pretty great. And, y'know, the positive karma of donating.

 

[Tom Capone]

I have worked as a tax accountant in the past. The very distant past. Generally you are able to deduct the lower of the FMV or your basis. In the case above, your basis is zero, at least in the eyes of the IRS. Likewise, if you bought something for $100 and received 10% cashback through a portal, your basis (and the amount you could deduct) would be $90.

This is the textbook answer. In reality it is unlikely this would ever become an issue unless you started deducting large amounts of these items. I deduct ~$300 per year for donations of used clothing and household goods to charity. I have little if any proof of this other than a slip of paper from goodwill saying I donated large bags of clothing and household goods. If you really wanted to be safe, I would take a picture of the donated items, a screenshot of a similar items on Amazon or similar, and get a receipt from the charity with a description of the item. You are not required to have the original receipt in order to deduct donations of goods.

You should also look at IRS publication 526 that discusses proof necessary for non cash donations of up to $250, $250-$500 and $500 and above.

 

[Matt]

Yeah this is ugly from a legal perspective.

The way around it to benefit would be more like:

1. Resell
2. Declare profit
3. eradicate profit into defined benefit plan/other expense
4. donate amount that you would otherwise used for retirement account/buying a Mac for 'business'.
5. Then refine by donating appreciate stock, save more...

Just more silly tax laws.

 

[calwatch]

If you hold the property for one year you can deduct the fair market value and not the cost you paid to acquire it (this is why people donate appreciated stock, for instance). I assigned a fair market value for the paper I deducted on the Form 8283 I filed last year (some of which was good paper, like color laser paper, legal size, and pre-hole punched, purchased years ago when Office Depot was giving away free after rewards paper) and can defend that in an audit, if the IRS wants to go after a few hundred bucks in taxes.