pdp1@EARTHLINK.NET on sun 15 aug 04
Hi Bonnie!
What fun...
Thank you.
And thank you for clearing up some of this...
Let me ask you this:
In a barter transaction, how does one determine which party
recieved 'income'?
Best wishes,
Phil
el ve
----- Original Message -----
From: "Jeremy/Bonnie Hellman"
> Hi Phil and anyone else still awake with this discussion-
>
> Those rich movie stars and other celebrities do NOT get to
deduct megabucks
> for their personal items donated to charity, even if the
charity sells them
> for megabucks. This is a big misconception. However, they
do get tons of
> public credit and thanks, unlike many artists who donate
pots they would
> otherwise sell to help pay their bills.
>
> If your business sells an item, it's revenue, whether
cash, federal reserve
> notes, credit card charges, debit card charges or check.
If your business
> barters an item, you have income. This is not the least
bit ambiguous to the
> Internal Revenue Service. (If you're audited, you will be
asked if you
> bartered any items, and if you included the value of the
items on your tax
> return.)
>
> What you have proposed, assuming that you actually record
the sale on your
> business records, does NOT improve your financial
situation in any way. No
> matter whether you barter, sell, donate or break the
piece, if you have
> ending inventory in your cost of goods sold, you have
deducted the cost of
> the materials in that pot or ceramic piece. If you do not
have inventory in
> your business, you are deducting the cost of the materials
at the time you
> buy them.
>
> If you donate the pot you have bought from your friend or
bartered, valued
> at exactly the same dollars as your pot that THEY bought
or bartered from
> you, where on your tax return are you planning to deduct
this charitable
> donation?
>
> There are 2 choices.
>
> One is to include it on your business return, likely a
Schedule C,
> presumably as advertising. If you do that your financial
position is
> essentially unchanged. You increased your income by a
given dollar amount.
> You decreased your net income by presumably the exact same
dollar amount. No
> change. Then there is the admittedly small audit risk that
my advertising
> expense could be disallowed on audit if I didn't get
enough exposure for my
> business donation to qualify as advertising.
>
> The second choice is to include that charitable donation
as a charitable
> donation, which means it appears on your itemized
deductions, Schedule A.
> You increase your income by a given dollar amount.
However, you have also
> increased your self-employment income by the same amount,
so the "income"
> (whether barter or cash) now "costs" you Self-Employment
Tax on Schedule SE.
> I have assumed that your Schedule C or Partnership
business generates
> taxable income, not a tax loss.
>
> You may actually not get a full deduction, or any
deduction on your Schedule
> A. Your standard deduction may be higher than your
itemized deductions, so
> you end up NOT itemizing, and not using Schedule A. Or, if
the income on the
> tax return is high enough, you will be subject to phase
out of your itemized
> deductions, and not get the full benefit of that
charitable contribution.
>
> However, even if you do get to deduct the full value on
your Schedule A,
> itemized deductions, you may be paying around 12%
(effective rate) of
> self-employment taxes. Where I live, in Monroeville, PA,
we also get to pay
> a gross receipts tax of .4% (less than half a percent)
regardless of net
> income. So if I have traded with you our $100 pots, I am
going to pay $12
> more in self-employment tax and $.40 in gross receipts
(mercantile) tax.
>
> I repeat that there is no financial advantage to doing
what you proposed,
> even assuming that all aspects of the transaction are
properly recorded on
> your books and tax return.
>
> If the charity realizes a million dollars from your
friend's $100 pot (that
> you donated), you cannot deduct a million dollars.
>
> The value of your own time is not a financial donation to
any charity
> whether you serve on the board of directors or stuff
envelopes or show up
> and create a ceramic masterpiece which the charity then
sells for megabucks.
> This is not to say you shouldn't do it. Indeed I would
encourage everyone to
> support any organization whose mission they agree with.
Support them with
> money, with ideas, with your time, with your creations of
all sorts. Just
> don't take a charitable donation for any dollar amount
unless you are out of
> pocket for that dollar amount.
>
> Steve Slatin has said, and I agree, that you can only
deduct the lower of
> cost or market for items you donate to charity, and the
IRS is definitely
> cracking down on this, particularly with cars and trucks.
The usual
> exception is appreciated capital items you have held for
at least 6 months,
> including stocks and bonds, and possibly works of art
where you can get an
> independent appraisal of their value. The other exception
I can think of
> would be an item you inherit, where the value has been
stepped up on the
> estate tax return.
>
> When you buy or barter for your fellow artist's pot, if
you receive a pot
> significantly greater in value than the one you sell your
friend, you would
> likely be expected to include as income on your return,
the higher value.
> The IRS assumes that you would only barter things of
approximately the same
> value, so you'd have a hard time suggesting that you got a
pot of greater
> value than the one you gave.
>
> Then there is also the question of what you have purchased
from your
> friend-- is it inventory, or a product you'll sell? If so,
it is NOT
> capital, no matter how long you own it. The value the
charity assigns to
> your pot, even the princely sum they receive when they
sell it, is not your
> deduction on your tax return. You get to deduct only the
amount you paid,
> and maybe less. As Steve Slatin said, you get to deduct
the lower of cost or
> market. (So if your friend's pot is worth a lot less money
than yours, you'd
> include the value of your pot on the income line of your
tax return, and
> deduct the fair market value of your friend's pot (which
is lower than the
> value of your pot) on your tax return. You lose!
>
> And yes, on your books, you record the retail price of the
pot you've
> sold/bartered to your friend, or your usual selling price.
You record the
> fair market value which is determined by looking at
similar sales of your
> work and/or their work.
>
> Is it an investment? If so, it sounds like a personal
purchase, not a
> business purchase. When you donate this pot, after 6
months, you'd have to
> prove that its value was the amount you claimed on your
return, assuming you
> can deduct it. You'll want to have on hand something to
document your value,
> if it is greater than the pot you bartered and included as
income on your
> tax return. Yes, this is possible, but not probable IMHO.
>
> However, let's say that you DID buy a fabulously valuable
pot for pennies at
> a Thrift Store or garage sale. You then put this into your
personal art
> collection and hold it long enough for it to become a
capital asset. Then
> you donate it to a qualifying charity. If the pot is truly
valuable, you've
> donated something valuable, rather than selling it and
keeping the money.
> This isn't a business transaction, it's a personal
transaction. And yes, if
> your intent is to give the charity a lot of money, I
believe you'd be best
> off tax wise, in donating the capital asset, rather than
selling it (and
> paying capital gains tax) and donating the cash, because
you could claim a
> charitable donation for the appreciated value. Certainly
this is true with
> stocks, and I believe it used to be true for works of art,
although I
> haven't looked at it in a long time, and it may not be
true.
>
> Phil, your proposed barter and donation as you outlined
it, at its very
> best, does not help you on your tax return. It may
actually cost you money.
>
> If you pay me a set sum of money to prepare a tax return
and YOU donate this
> service to a bona fide charity, I will include the money
you pay me on my
> business tax return. You may be able to take a donation
for this same sum on
> your tax return. I would thank you for donating my
services (for which I've
> been paid). If I decide to donate the value of my
preparing a tax return to
> that same charity, I would NOT include anything in income,
you would not get
> a charitable donation and I would not get a charitable
donation, because the
> value of my time is not a charitable deduction. When I
donate my time to an
> organization that provides free tax preparation services
to low income
> seniors, I feel good that I'm doing something to benefit
society, but the
> only write-off is my mileage and parking fees.
>
> Phil, in your original posting, I was quite uncomfortable
that you might be
> suggesting people would not record income for their
barter. Apparently you
> were only suggesting that actual cash/check did not need
to change hands. I
> agree that cash does not need to change hands, but I'd
repeat that barter is
> retail income for businesses. There is no consensus needed
and there are no
> ambiguities in the US tax code on this subject. That's
what you are supposed
> to do.
>
> That's how it works. Usually with taxes when it looks too
good to be true,
> or you are getting a greater benefit than it costs you, it
IS usually too
> good to be true.
>
> As usual, I recommend that you consult your own tax
advisor for your own
> particular situation, and don't rely on your own
interpretation of the way
> you wish the tax code were written.
>
> Bonnie
> Bonnie Hellman, CPA in PA & CO
>
>
> ----- Original Message -----
> From:
> To:
> Sent: Saturday, August 14, 2004 1:56 PM
> Subject: Re: How do one handle donations. - Now,
respecting Bonnie's
> mention...
>
>
> > Hi Bonnie,
> >
> >
> > Below...amid...!
> >
> > ----- Original Message -----
> > From: "Jeremy/Bonnie Hellman"
> >
> > > Hi Phil and other clayarters,
> > >
> > > We've been through this before.... if you sell your
work
> > at whatever price,
> > > this is income to you.
> >
> >
> > Yes, or, no, or it depends, but generally, that is the
> > consensus...too, there are ambiguities sometimes...
> >
> > Income may also be one's receiving goods or services in
> > exchange for one's "Pots" or one's Work, or one's goods
or
> > services, yes?
> >
> >
> > >If you buy someone else's pot, perhaps it is a
> > > business expense (advertising for your business when
your
> > name appears in
> > > the program or purchased as a pot you need to study to
> > improve your own
> > > work?), but maybe not.
> >
> >
> > Yes, maybe, or maybe not, and or, if you buy or trade
> > something for some one else's
> > something, and, donate that something a charity, it may
or
> > may not be a
> > deductible expense for your having bought and donated
> > it...but when it is, it is...
> >
> > One can also donate someone else's services for which
one
> > has paid, yes?
> > And have a charitable deduction for it...
> >
> >
> > > If it is a business deduction, and you deduct it on
> > > your US tax return, then the net on your business tax
> > return is zero, and
> > > you're no better off and possibly no worse off (unless
you
> > live in an area
> > > with a gross receipts tax, in which case you end up
out of
> > pocket as you
> > > remit that gross receipts tax to your local taxing
> > authority. If you deduct
> > > the purchase of the other pot, you have already
written
> > off the cost and
> > > cannot claim it a second time, when you donate it.
> >
> > It may or may not be a 'business' deduction...or would
> > depend on whether one is in business or not, or the kind
of
> > business it is, for the kind of
> > deduction it is, but, broadly, we are talking about
> > deductions to charity, whether from a business as such,
or
> > not...and maybe we are talking also about business
> > deductions as relate to the cost of doing business or
> > advertising or promotion and so on...
> >
> > Too, it depends on what one paid for the "Pot"...one
could
> > buy a very valuable Pot in an occasion of an unexpected
> > bargain at a garage sale or thrift store, and, getting
it
> > appraised, find it to have an
> > authenticated high value which may be verified. One
could
> > then
> > donate this Pot to a charity, and what you paid for it
is
> > then kind of moot. The value of the donation would be
the
> > appraised value, and that value would not be a
> > capital gains, or other liability, would it?
> >
> > Too, some of this may depend for it's utility, on one's
tax
> > bracket, would it not?...and or if one finds
> > advantage in lowering the net profits, enough
> > to get into the next
> > lower bracket, or if that is worthwhile...
> >
> > ...it is a game of puzzles, no?
> >
> > ...seems so to me...
> >
> >
> > > If you don't deduct the pot you "buy" as a business
> > expense and plan to
> > > deduct it as a charitable contribution, that appears
not
> > on your business
> > > tax return, but as an itemized deduction on Schedule A
(if
> > you have enough
> > > deductions to exceed the standard deduction), possibly
> > subject to certain
> > > limits, if family income is high enough. Even if you
can
> > deduct the full
> > > cost on your Schedule A, you have included additional
> > income, probably
> > > subject to some self-employment tax.
> >
> > Probably...yes...
> >
> >
> >
> > > The final word is that this is NOT a way around your
not
> > being able to take
> > > a deduction for the retail price of donations of
ceramic
> > pieces you make. It
> > > just can't be done legally.
> >
> > I never said anything about 'retail' in any way
whatsoever.
> >
> > Too...
> >
> > It would be and is, entirely 'legal' to buy someone
else's
> > Pot, and to
> > donate it to a charity, and to receive from that charity
a
> > receipt as indicates the value they assign to it, or to
use
> > some method as would be accepted as to what the value of
the
> > pot or other item is, and, to
> > deduct that value as a charitable contribution, or as
one is
> > entitled to do, anyway.
> >
> > If two Artists buy each others' work and do this, it is
> > entirely legal.
> >
> > Now, how much of what kind of advantage they may find,
and
> > in what way, is a
> > different question.
> >
> >
> >
> > When rich patrons donate Art to charities, when rich
rock
> > stars donate a guitar or a tee-shirt or whatever, it is
not
> > usually
> > Art or items they as individuals have made, is it?
> >
> > No...
> >
> > They get full 'fair' market value for their donation
too, do
> > they not?
> >
> > A tee shirt may be 'worth' five thousand dollars, and
they
> > will get that much of a 'deduction' do they not?
> >
> > Yes, they do...
> >
> >
> > > You never get to deduct the value of your time. You
only
> > get to deduct the
> > > cost of materials that went into the piece you
donated,
> > and presumably you
> > > have already deducted those.
> >
> >
> > You get to deduct the value which is accepted or
assigned to
> > the thing in question according to the reasoning or
logic or
> > appraisal or agreements as concern the value which the
> > thing is demonstrated to have.
> >
> > If a wealthy patron donates a Picasso to a charity, he
or
> > she does not tend to merely 'deduct' the value of the
> > materials it is made of, but the value assigned to it by
> > some other criteria, such as appraisals or the sale
price in
> > the actual charity auction or something as gets
negotiated
> > between his or her representatives and the IRS.
> >
> > Or...
> >
> > Yes, but you may deduct the value of someone else's
"time"
> > when you have paid them for it, for something as is a
> > deduction, an expense, or for something as is to be
placed
> > in an
> > depreciation schedule...or something one is to donate to
a
> > charity...
> >
> > Hence, my initial quip...
> >
> > Let it be someone else's "time" and you may deduct it
'as'
> > you
> > are entitled to do according to how you are entitled to
do
> > so..
> >
> > The rest of which subsequent to or ancillary to that, is
> > itself a worthy topic, but not yet THE
> > topic necessarily, or, we best get this in the
operatively
> > useful order lest we become, or remain, confused...
> >
> >
> > > So, Phil, you may want to stop advising people to do
this,
> > since it is not
> > > legal and never has been.
> >
> > Bonnie, I did not "advise" anyone to do anything!
> >
> > I was, and am, thinking 'out loud' TO enjoy doing so,
and to
> > enjoy a
> > discussion.
> >
> > And, I will argue with you till the Cows come home that
it
> > is certainly and entirely "legal" to buy someone's Work,
and
> > to donate to to a
> > Charity, and to take the deduction to which one is
entitled
> > to
> > for having done so. Or to buy someone's Work as a
business
> > expense, and when appropriate, to enjoy the deduction or
> > depreciation allowance for that Work, to which one is
> > entitled.
> >
> >
> > And that it is entirely legal for two parties to buy one
> > another's Work, and to donate said Work to some charity
and
> > to take the deduction to which they are entitled for
having
> > done so.
> >
> > Or, to buy one another's Work where to do so is a
business
> > expense, and, where appropriate, to depreciate it on a
> > schedule or deduct it as may be according to the code
> > particulars as regard it...
> >
> >
> > What is the confusion here????
> >
> > I think you did not understand what I was saying...!
> >
> >
> >
> > > Bonnie
> > > Bonnie Hellman, CPA in PA & CO
> >
> >
> > Best wishes!
> >
> > Hugs and play...
> >
> >
> > Phil
> > el ve
> >
> >
>
____________________________________________________________
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> >
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> >
> > Moderator of the list is Mel Jacobson who may be reached
at
> melpots@pclink.com.
> >
>
>
____________________________________________________________
__________________
> Send postings to clayart@lsv.ceramics.org
>
> You may look at the archives for the list or change your
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> settings from http://www.ceramics.org/clayart/
>
> Moderator of the list is Mel Jacobson who may be reached
at melpots@pclink.com.
Kathi LeSueur on sun 15 aug 04
As usual, Bonnie's tax advice is first rate and I suggest everyone read
it carefully. Having been audited, I'm extremely careful about what I
deduct. Though I came out relatively unscathed, I definitely would not
want to repeat the experience again.
My policy in regard to donations has developed over a long time. I get
lots of requests. I've had people pick up a pick and rudely tell me that
it wasn't what they expected to recieve. I now only donate to
organizations that I know personally and have some connection to. And,
then I give them a first rate piece. At the last event I donated to, my
$100 pot went for $200. It was brought by the people who picked up the
piece and they came to the event determined to take it home. the next
week I received orders for three of those pots. Great publicity.
Kathi
Steve Slatin on sun 15 aug 04
Phil --
Both parties have income. As the IRS once quipped,
Bartering occurs when you exchange goods or services without exchanging money. An example of bartering is a plumber doing repair work for a dentist in exchange for dental services. The fair market value of goods and services exchanged must be included in the income of both parties.
pdp1@EARTHLINK.NET wrote:
Hi Bonnie!
What fun...
Thank you.
And thank you for clearing up some of this...
Let me ask you this:
In a barter transaction, how does one determine which party
recieved 'income'?
Steve Slatin -- Entry-level potter, journeyman loafer, master obfuscator
Sequim, Washington, USA
48.0937°N, 123.1465°W or thereabouts
__________________________________________________
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Jeremy/Bonnie Hellman on sun 15 aug 04
Hi Phil,
In a barter transactions between 2 businesses (or 3 or 4), each and every
business records income.
Your business and my business trade (barter), one of your fabulous tools for
one of my fabulous pots. Even if my business normally sells that type of pot
for $45 and your tool normally sells for $55, I should record $55 of income,
and you should record $55 of income.
Now I will use your fabulous tool in making more of my fabulous pots, so I
also have $55 of expense on my Schedule C. The $55 of income and the $55 of
expense net out to zero, so my business bottom line is unchanged.
However, you have decided to give my fabulous pot to your best friend as a
birthday gift, and your best friend has nothing to do with your business.
Therefore, you cannot include $55 of expense on your Schedule C tax return.
You have included $55 of additional income on your tax return, and $0 of
expense, and your net income is increased by $55.
However you did not need to go out and buy a birthday gift for your best
friend, and the "cost" of that fabulous birthday gift to you consists of 12%
effective self employment tax on $55 or $6.60 plus your incremental tax
rate, say 14% on $55 or $7.70, for a total out of pocket cost to you of
$14.30. It's not really a lot of money for such a fabulous birthday gift for
your best friend, and that's why you might do it. If your incremental tax
bracket is 26%, the tax cost is $14.30, and the total cost is $20.90, still
not a bad deal for you. You've given a birthday gift worth $45 or $55 to
your friend, and the cost was less than $21.
Bonnie
----- Original Message -----
From:
To:
Sent: Sunday, August 15, 2004 1:41 PM
Subject: Re: How do one handle donations - Bonnie's mention...
> Hi Bonnie!
>
>
> What fun...
>
> Thank you.
>
> And thank you for clearing up some of this...
>
>
> Let me ask you this:
>
> In a barter transaction, how does one determine which party
> received 'income'?
>
>
>
> Best wishes,
>
> Phil
> el ve
>
>
>
> ----- Original Message -----
> From: "Jeremy/Bonnie Hellman"
>
>
> > Hi Phil and anyone else still awake with this discussion-
> >
> > Those rich movie stars and other celebrities do NOT get to
> deduct megabucks
> > for their personal items donated to charity, even if the
> charity sells them
> > for megabucks. This is a big misconception. However, they
> do get tons of
> > public credit and thanks, unlike many artists who donate
> pots they would
> > otherwise sell to help pay their bills.
> >
> > If your business sells an item, it's revenue, whether
> cash, federal reserve
> > notes, credit card charges, debit card charges or check.
> If your business
> > barters an item, you have income. This is not the least
> bit ambiguous to the
> > Internal Revenue Service. (If you're audited, you will be
> asked if you
> > bartered any items, and if you included the value of the
> items on your tax
> > return.)
> >
> > What you have proposed, assuming that you actually record
> the sale on your
> > business records, does NOT improve your financial
> situation in any way. No
> > matter whether you barter, sell, donate or break the
> piece, if you have
> > ending inventory in your cost of goods sold, you have
> deducted the cost of
> > the materials in that pot or ceramic piece. If you do not
> have inventory in
> > your business, you are deducting the cost of the materials
> at the time you
> > buy them.
> >
> > If you donate the pot you have bought from your friend or
> bartered, valued
> > at exactly the same dollars as your pot that THEY bought
> or bartered from
> > you, where on your tax return are you planning to deduct
> this charitable
> > donation?
> >
> > There are 2 choices.
> >
> > One is to include it on your business return, likely a
> Schedule C,
> > presumably as advertising. If you do that your financial
> position is
> > essentially unchanged. You increased your income by a
> given dollar amount.
> > You decreased your net income by presumably the exact same
> dollar amount. No
> > change. Then there is the admittedly small audit risk that
> my advertising
> > expense could be disallowed on audit if I didn't get
> enough exposure for my
> > business donation to qualify as advertising.
> >
> > The second choice is to include that charitable donation
> as a charitable
> > donation, which means it appears on your itemized
> deductions, Schedule A.
> > You increase your income by a given dollar amount.
> However, you have also
> > increased your self-employment income by the same amount,
> so the "income"
> > (whether barter or cash) now "costs" you Self-Employment
> Tax on Schedule SE.
> > I have assumed that your Schedule C or Partnership
> business generates
> > taxable income, not a tax loss.
> >
> > You may actually not get a full deduction, or any
> deduction on your Schedule
> > A. Your standard deduction may be higher than your
> itemized deductions, so
> > you end up NOT itemizing, and not using Schedule A. Or, if
> the income on the
> > tax return is high enough, you will be subject to phase
> out of your itemized
> > deductions, and not get the full benefit of that
> charitable contribution.
> >
> > However, even if you do get to deduct the full value on
> your Schedule A,
> > itemized deductions, you may be paying around 12%
> (effective rate) of
> > self-employment taxes. Where I live, in Monroeville, PA,
> we also get to pay
> > a gross receipts tax of .4% (less than half a percent)
> regardless of net
> > income. So if I have traded with you our $100 pots, I am
> going to pay $12
> > more in self-employment tax and $.40 in gross receipts
> (mercantile) tax.
> >
> > I repeat that there is no financial advantage to doing
> what you proposed,
> > even assuming that all aspects of the transaction are
> properly recorded on
> > your books and tax return.
> >
> > If the charity realizes a million dollars from your
> friend's $100 pot (that
> > you donated), you cannot deduct a million dollars.
> >
> > The value of your own time is not a financial donation to
> any charity
> > whether you serve on the board of directors or stuff
> envelopes or show up
> > and create a ceramic masterpiece which the charity then
> sells for megabucks.
> > This is not to say you shouldn't do it. Indeed I would
> encourage everyone to
> > support any organization whose mission they agree with.
> Support them with
> > money, with ideas, with your time, with your creations of
> all sorts. Just
> > don't take a charitable donation for any dollar amount
> unless you are out of
> > pocket for that dollar amount.
> >
> > Steve Slatin has said, and I agree, that you can only
> deduct the lower of
> > cost or market for items you donate to charity, and the
> IRS is definitely
> > cracking down on this, particularly with cars and trucks.
> The usual
> > exception is appreciated capital items you have held for
> at least 6 months,
> > including stocks and bonds, and possibly works of art
> where you can get an
> > independent appraisal of their value. The other exception
> I can think of
> > would be an item you inherit, where the value has been
> stepped up on the
> > estate tax return.
> >
> > When you buy or barter for your fellow artist's pot, if
> you receive a pot
> > significantly greater in value than the one you sell your
> friend, you would
> > likely be expected to include as income on your return,
> the higher value.
> > The IRS assumes that you would only barter things of
> approximately the same
> > value, so you'd have a hard time suggesting that you got a
> pot of greater
> > value than the one you gave.
> >
> > Then there is also the question of what you have purchased
> from your
> > friend-- is it inventory, or a product you'll sell? If so,
> it is NOT
> > capital, no matter how long you own it. The value the
> charity assigns to
> > your pot, even the princely sum they receive when they
> sell it, is not your
> > deduction on your tax return. You get to deduct only the
> amount you paid,
> > and maybe less. As Steve Slatin said, you get to deduct
> the lower of cost or
> > market. (So if your friend's pot is worth a lot less money
> than yours, you'd
> > include the value of your pot on the income line of your
> tax return, and
> > deduct the fair market value of your friend's pot (which
> is lower than the
> > value of your pot) on your tax return. You lose!
> >
> > And yes, on your books, you record the retail price of the
> pot you've
> > sold/bartered to your friend, or your usual selling price.
> You record the
> > fair market value which is determined by looking at
> similar sales of your
> > work and/or their work.
> >
> > Is it an investment? If so, it sounds like a personal
> purchase, not a
> > business purchase. When you donate this pot, after 6
> months, you'd have to
> > prove that its value was the amount you claimed on your
> return, assuming you
> > can deduct it. You'll want to have on hand something to
> document your value,
> > if it is greater than the pot you bartered and included as
> income on your
> > tax return. Yes, this is possible, but not probable IMHO.
> >
> > However, let's say that you DID buy a fabulously valuable
> pot for pennies at
> > a Thrift Store or garage sale. You then put this into your
> personal art
> > collection and hold it long enough for it to become a
> capital asset. Then
> > you donate it to a qualifying charity. If the pot is truly
> valuable, you've
> > donated something valuable, rather than selling it and
> keeping the money.
> > This isn't a business transaction, it's a personal
> transaction. And yes, if
> > your intent is to give the charity a lot of money, I
> believe you'd be best
> > off tax wise, in donating the capital asset, rather than
> selling it (and
> > paying capital gains tax) and donating the cash, because
> you could claim a
> > charitable donation for the appreciated value. Certainly
> this is true with
> > stocks, and I believe it used to be true for works of art,
> although I
> > haven't looked at it in a long time, and it may not be
> true.
> >
> > Phil, your proposed barter and donation as you outlined
> it, at its very
> > best, does not help you on your tax return. It may
> actually cost you money.
> >
> > If you pay me a set sum of money to prepare a tax return
> and YOU donate this
> > service to a bona fide charity, I will include the money
> you pay me on my
> > business tax return. You may be able to take a donation
> for this same sum on
> > your tax return. I would thank you for donating my
> services (for which I've
> > been paid). If I decide to donate the value of my
> preparing a tax return to
> > that same charity, I would NOT include anything in income,
> you would not get
> > a charitable donation and I would not get a charitable
> donation, because the
> > value of my time is not a charitable deduction. When I
> donate my time to an
> > organization that provides free tax preparation services
> to low income
> > seniors, I feel good that I'm doing something to benefit
> society, but the
> > only write-off is my mileage and parking fees.
> >
> > Phil, in your original posting, I was quite uncomfortable
> that you might be
> > suggesting people would not record income for their
> barter. Apparently you
> > were only suggesting that actual cash/check did not need
> to change hands. I
> > agree that cash does not need to change hands, but I'd
> repeat that barter is
> > retail income for businesses. There is no consensus needed
> and there are no
> > ambiguities in the US tax code on this subject. That's
> what you are supposed
> > to do.
> >
> > That's how it works. Usually with taxes when it looks too
> good to be true,
> > or you are getting a greater benefit than it costs you, it
> IS usually too
> > good to be true.
> >
> > As usual, I recommend that you consult your own tax
> advisor for your own
> > particular situation, and don't rely on your own
> interpretation of the way
> > you wish the tax code were written.
> >
> > Bonnie
> > Bonnie Hellman, CPA in PA & CO
> >
> >
> > ----- Original Message -----
> > From:
> > To:
> > Sent: Saturday, August 14, 2004 1:56 PM
> > Subject: Re: How do one handle donations. - Now,
> respecting Bonnie's
> > mention...
> >
> >
> > > Hi Bonnie,
> > >
> > >
> > > Below...amid...!
> > >
> > > ----- Original Message -----
> > > From: "Jeremy/Bonnie Hellman"
> > >
> > > > Hi Phil and other clayarters,
> > > >
> > > > We've been through this before.... if you sell your
> work
> > > at whatever price,
> > > > this is income to you.
> > >
> > >
> > > Yes, or, no, or it depends, but generally, that is the
> > > consensus...too, there are ambiguities sometimes...
> > >
> > > Income may also be one's receiving goods or services in
> > > exchange for one's "Pots" or one's Work, or one's goods
> or
> > > services, yes?
> > >
> > >
> > > >If you buy someone else's pot, perhaps it is a
> > > > business expense (advertising for your business when
> your
> > > name appears in
> > > > the program or purchased as a pot you need to study to
> > > improve your own
> > > > work?), but maybe not.
> > >
> > >
> > > Yes, maybe, or maybe not, and or, if you buy or trade
> > > something for some one else's
> > > something, and, donate that something a charity, it may
> or
> > > may not be a
> > > deductible expense for your having bought and donated
> > > it...but when it is, it is...
> > >
> > > One can also donate someone else's services for which
> one
> > > has paid, yes?
> > > And have a charitable deduction for it...
> > >
> > >
> > > > If it is a business deduction, and you deduct it on
> > > > your US tax return, then the net on your business tax
> > > return is zero, and
> > > > you're no better off and possibly no worse off (unless
> you
> > > live in an area
> > > > with a gross receipts tax, in which case you end up
> out of
> > > pocket as you
> > > > remit that gross receipts tax to your local taxing
> > > authority. If you deduct
> > > > the purchase of the other pot, you have already
> written
> > > off the cost and
> > > > cannot claim it a second time, when you donate it.
> > >
> > > It may or may not be a 'business' deduction...or would
> > > depend on whether one is in business or not, or the kind
> of
> > > business it is, for the kind of
> > > deduction it is, but, broadly, we are talking about
> > > deductions to charity, whether from a business as such,
> or
> > > not...and maybe we are talking also about business
> > > deductions as relate to the cost of doing business or
> > > advertising or promotion and so on...
> > >
> > > Too, it depends on what one paid for the "Pot"...one
> could
> > > buy a very valuable Pot in an occasion of an unexpected
> > > bargain at a garage sale or thrift store, and, getting
> it
> > > appraised, find it to have an
> > > authenticated high value which may be verified. One
> could
> > > then
> > > donate this Pot to a charity, and what you paid for it
> is
> > > then kind of moot. The value of the donation would be
> the
> > > appraised value, and that value would not be a
> > > capital gains, or other liability, would it?
> > >
> > > Too, some of this may depend for it's utility, on one's
> tax
> > > bracket, would it not?...and or if one finds
> > > advantage in lowering the net profits, enough
> > > to get into the next
> > > lower bracket, or if that is worthwhile...
> > >
> > > ...it is a game of puzzles, no?
> > >
> > > ...seems so to me...
> > >
> > >
> > > > If you don't deduct the pot you "buy" as a business
> > > expense and plan to
> > > > deduct it as a charitable contribution, that appears
> not
> > > on your business
> > > > tax return, but as an itemized deduction on Schedule A
> (if
> > > you have enough
> > > > deductions to exceed the standard deduction), possibly
> > > subject to certain
> > > > limits, if family income is high enough. Even if you
> can
> > > deduct the full
> > > > cost on your Schedule A, you have included additional
> > > income, probably
> > > > subject to some self-employment tax.
> > >
> > > Probably...yes...
> > >
> > >
> > >
> > > > The final word is that this is NOT a way around your
> not
> > > being able to take
> > > > a deduction for the retail price of donations of
> ceramic
> > > pieces you make. It
> > > > just can't be done legally.
> > >
> > > I never said anything about 'retail' in any way
> whatsoever.
> > >
> > > Too...
> > >
> > > It would be and is, entirely 'legal' to buy someone
> else's
> > > Pot, and to
> > > donate it to a charity, and to receive from that charity
> a
> > > receipt as indicates the value they assign to it, or to
> use
> > > some method as would be accepted as to what the value of
> the
> > > pot or other item is, and, to
> > > deduct that value as a charitable contribution, or as
> one is
> > > entitled to do, anyway.
> > >
> > > If two Artists buy each others' work and do this, it is
> > > entirely legal.
> > >
> > > Now, how much of what kind of advantage they may find,
> and
> > > in what way, is a
> > > different question.
> > >
> > >
> > >
> > > When rich patrons donate Art to charities, when rich
> rock
> > > stars donate a guitar or a tee-shirt or whatever, it is
> not
> > > usually
> > > Art or items they as individuals have made, is it?
> > >
> > > No...
> > >
> > > They get full 'fair' market value for their donation
> too, do
> > > they not?
> > >
> > > A tee shirt may be 'worth' five thousand dollars, and
> they
> > > will get that much of a 'deduction' do they not?
> > >
> > > Yes, they do...
> > >
> > >
> > > > You never get to deduct the value of your time. You
> only
> > > get to deduct the
> > > > cost of materials that went into the piece you
> donated,
> > > and presumably you
> > > > have already deducted those.
> > >
> > >
> > > You get to deduct the value which is accepted or
> assigned to
> > > the thing in question according to the reasoning or
> logic or
> > > appraisal or agreements as concern the value which the
> > > thing is demonstrated to have.
> > >
> > > If a wealthy patron donates a Picasso to a charity, he
> or
> > > she does not tend to merely 'deduct' the value of the
> > > materials it is made of, but the value assigned to it by
> > > some other criteria, such as appraisals or the sale
> price in
> > > the actual charity auction or something as gets
> negotiated
> > > between his or her representatives and the IRS.
> > >
> > > Or...
> > >
> > > Yes, but you may deduct the value of someone else's
> "time"
> > > when you have paid them for it, for something as is a
> > > deduction, an expense, or for something as is to be
> placed
> > > in an
> > > depreciation schedule...or something one is to donate to
> a
> > > charity...
> > >
> > > Hence, my initial quip...
> > >
> > > Let it be someone else's "time" and you may deduct it
> 'as'
> > > you
> > > are entitled to do according to how you are entitled to
> do
> > > so..
> > >
> > > The rest of which subsequent to or ancillary to that, is
> > > itself a worthy topic, but not yet THE
> > > topic necessarily, or, we best get this in the
> operatively
> > > useful order lest we become, or remain, confused...
> > >
> > >
> > > > So, Phil, you may want to stop advising people to do
> this,
> > > since it is not
> > > > legal and never has been.
> > >
> > > Bonnie, I did not "advise" anyone to do anything!
> > >
> > > I was, and am, thinking 'out loud' TO enjoy doing so,
> and to
> > > enjoy a
> > > discussion.
> > >
> > > And, I will argue with you till the Cows come home that
> it
> > > is certainly and entirely "legal" to buy someone's Work,
> and
> > > to donate to a
> > > Charity, and to take the deduction to which one is
> entitled
> > > to
> > > for having done so. Or to buy someone's Work as a
> business
> > > expense, and when appropriate, to enjoy the deduction or
> > > depreciation allowance for that Work, to which one is
> > > entitled.
> > >
> > >
> > > And that it is entirely legal for two parties to buy one
> > > another's Work, and to donate said Work to some charity
> and
> > > to take the deduction to which they are entitled for
> having
> > > done so.
> > >
> > > Or, to buy one another's Work where to do so is a
> business
> > > expense, and, where appropriate, to depreciate it on a
> > > schedule or deduct it as may be according to the code
> > > particulars as regard it...
> > >
> > >
> > > What is the confusion here????
> > >
> > > I think you did not understand what I was saying...!
> > >
> > >
> > >
> > > > Bonnie
> > > > Bonnie Hellman, CPA in PA & CO
> > >
> > >
> > > Best wishes!
> > >
> > > Hugs and play...
> > >
> > >
> > > Phil
> > > el ve
> > >
> > >
> >
> ____________________________________________________________
> ________________
> > __
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> > >
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> > >
> > > Moderator of the list is Mel Jacobson who may be reached
> at
> > melpots@pclink.com.
> > >
> >
> >
> ____________________________________________________________
> __________________
> > Send postings to clayart@lsv.ceramics.org
> >
> > You may look at the archives for the list or change your
> subscription
> > settings from http://www.ceramics.org/clayart/
> >
> > Moderator of the list is Mel Jacobson who may be reached
> at melpots@pclink.com.
>
>
____________________________________________________________________________
__
> Send postings to clayart@lsv.ceramics.org
>
> You may look at the archives for the list or change your subscription
> settings from http://www.ceramics.org/clayart/
>
> Moderator of the list is Mel Jacobson who may be reached at
melpots@pclink.com.
>
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