New Idea for Selling on eBay for Charity - Charitable Deduction Tax Questions

[pumpkinpies]

Currently on eBay there are two main scenarios for sellers to sell items for the benefit of charity:

https://www.ebay.com/help/donating-ebay-charity/default/buying-selling-ebay-benefit-nonprofit-organizations?id=4668

1. Community Selling - a seller can donate from 10% (minimum $1.00) to 100% of a individual sale to a charity.

2. Direct Sales - all sales from a eBay user ID go toward charity and are considered direct selling for the charity.

The guidelines for buyers says they can generally can't have a tax deduction for items purchased through direct sales. This is due to the buyers benefiting from the sale via the goods they purchase and use.

I have an idea for a different type of charity donation. In this scenario a seller would offer to sell goods to the buyer and then deliver those goods to a charity on behalf of the buyer. The seller would receive the funds from such a sale on eBay and would then deliver these goods to the charity denoted in the eBay listings. The seller would obtain a signed receipt for goods from the charity upon delivery. The seller would mail the receipt to the buyer to use for documenting a deduction on their taxes.

This would allow a seller to move various lots of merchandise and be paid for the cost of their inventory plus their time to deliver the goods. Fund received would of course be included in the seller's taxable income. Buyers should be able to deduct this expense on their taxes as they are not the end users of the goods. Would the buyer value the donation at the price they paid on eBay or the actual market value? For example, if the buyer purchased a lot of items that normally sell for $500 at other retail sites for $100 would the buyer be able to deduct $500 or just the $100, assuming of course the buyer can easily document what the items normally sell for?

A typical example might involve a seller who has acquired a large lot of new pet related supplies. Due to the high cost of shipping these items they are not suitable for online selling on eBay as the postal fees would be to large. These items would; however, be desirable to an animal shelter. The seller would instead offer these goods at a hugely discounted price on eBay that included delivery to a a specific local animal shelter. The seller keeps would keep all funds from the sale. Upon delivery the seller obtains a receipt from the charity and mails it to the buyer. The buyer then uses the receipt to document a tax deduction either at their purchase price or the actual higher retail price of the items delivered. This allows buyers on eBay to purchase merchandise for charities at well below market value and sellers are able to move merchandise out of their inventory while recouping their expenses.

 

[adjusterjack]

Even if the deduction for the buyer would be allowed by the IRS (and I don't have the answer for that) it would have to be for the amount the buyer paid for it and not some "pie in the sky" market value. The IRS doesn't like "pie in the sky."

Stick around for the tax man to comment on whether the deduction would be allowed.

 

[LdiJ]

Even if the deduction for the buyer would be allowed by the IRS (and I don't have the answer for that) it would have to be for the amount the buyer paid for it and not some "pie in the sky" market value. The IRS doesn't like "pie in the sky."

Stick around for the tax man to comment on whether the deduction would be allowed.

There are general rules for charitable giving when goods are involved. The first example would be a charitable auction. Lets say that I bid on an item that has an FMV of $100.00, but the bidding pushes it up to $150.00. The amount of the charitable donation is reduced by the amount of the FMV of the value, so the charitable donation is actually only $50.00.

Another rule of charitable giving is that if you donate goods to a charity, the amount of the donation is what you paid for the goods, OR, the FMV of the goods if you acquired them other than by purchase. An example of that would be that you inherited a household of goods from your parents, and after you removed what you actually wanted, you called Goodwill or Amvets or some other charitable organization to come and collect the rest. FMV for those kind of used goods would be about 10-20% of original retail value. The IRS actually published a list of suggested values for used goods for charitable deduction purposes.

Publication 561 is a good reference tool.

 

[FlyingRon]

Yep, and the charity exploiters such has you were hit up pretty hard by the IRS in the past decade (notably the car donation scams where the IRS holds only the amount actually received by the charity is deductible, not some imagined valuation by the charity).

It's not clear why the charity needs you in the loop exploiting things for profit.

 

[pumpkinpies]

Yep, and the charity exploiters such has you were hit up pretty hard by the IRS in the past decade (notably the car donation scams where the IRS holds only the amount actually received by the charity is deductible, not some imagined valuation by the charity).

It's not clear why the charity needs you in the loop exploiting things for profit.

Not sure where you get off calling me a charity exploiter. Liable can be a rather expensive business.

I've run a business selling goods online for 19 years. I also resale items through brick and mortar via consignment. Many of my goods are acquired at estate and business auctions. One has to be at the right time and the right place with enough money to buy the items. One also needs a place to store the items and transport such as a truck.

I can easily spend 10-12 straight hours hours attending a single auction just to acquire large lots of goods and we are even not talking about the time required to haul the items away, store them, sort through the items, possibly recondition them and a host of other expenses in getting the items prepared for resale. Yet you somehow think this just spontaneously happens on its own accord. I provide a service and expect to be reimbursed otherwise the public is free to purchase items for their charity at full retail value as opposed to much lower prices I could offer. The charity is free to pay someone to attend the auction for the same amount of time but that wouldn’t make much sense as they are only after one item whereas I buy practically anything.

A recent example includes a bulk lot of 50 pet related supplies that were part of larger group of items. These items are new and sell on Amazon, eBay and at multiple retail stores such as Wal-Mart for $9.99 plus sales tax. I acquired them for $.40 each. I needed to haul them home, store them, wipe some dust off some unit’s sealed outer packaging, photograph and properly inventory the items. So are talking a total consumer retail value of $534.47 with sales tax included.

I could put these items in one of the consignment shops I do business with at a price of $7.00. The shop would take 30% but handle all the sales and immediately open up storage space here, leaving $4.90 per unit in gross profit or $245.

I could instead list them on eBay at a BuyItNow item for $125 which includes delivery to a local animal shelter. The leaves $75.40 gross profit for my time. The drive to the animal shelter will take an hour of my time.

So the consumer is able to donate over $500 of gods for $125. The charity gets free supplies. I am able to recover my expenses. Yet you think I am someone exploding the charity. I am providing a service just like any other business. When a electrician or plumber does work for the charity are they exploiting the business when they actually send them a bill for their work. Are the employees of the animal shelter expected to work for zero wages then too?

Even if the deduction for the buyer would be allowed by the IRS (and I don't have the answer for that) it would have to be for the amount the buyer paid for it and not some "pie in the sky" market value. The IRS doesn't like "pie in the sky."

Stick around for the tax man to comment on whether the deduction would be allowed.

I am not involved in what the buyer would deduct, but the fair market value can easily be established by examining what multiple other websites and brick and mortar shops are selling the same item for. The buyer is only obtaining the goods for the charity at below market value because I am donating profits I would normally generate on the items.

There are general rules for charitable giving when goods are involved. The first example would be a charitable auction. Lets say that I bid on an item that has an FMV of $100.00, but the bidding pushes it up to $150.00. The amount of the charitable donation is reduced by the amount of the FMV of the value, so the charitable donation is actually only $50.00.

Another rule of charitable giving is that if you donate goods to a charity, the amount of the donation is what you paid for the goods, OR, the FMV of the goods if you acquired them other than by purchase. An example of that would be that you inherited a household of goods from your parents, and after you removed what you actually wanted, you called Goodwill or Amvets or some other charitable organization to come and collect the rest. FMV for those kind of used goods would be about 10-20% of original retail value. The IRS actually published a list of suggested values for used goods for charitable deduction purposes.

Publication 561 is a good reference tool.

But what are rules for purchasing items at below market value? A $150.00 items purchased for $50.

There is a local retired wealthy businessman in his 80s that regularly purchases items at auctions at below market value so he can write them off a much higher market value when he donates the items. Close examination of the books show a lot of them will actually end up in the recycling bing at Goodwill as they have damage. This dude even purchased a local building under the guise of trying to resell some of these goods. This was a scam to write off business expenses. He has purchased vintage local country history books and then donates them to colleges at a value of hundreds of dollar each. In the past these books were actually worth several hundred dollars each because people purchased them for genealogical research in the days before the internet; however, many are now available for free from Google Books as they are in the public domain thus they are not that valuable anymore.

We even have some people who hang around auctions to pick up goods that no one wants. These vultures then haul them to the local Goodwill and to get a receipt for a charitable deduction. I guess they are donating their time.

 

[LdiJ]

Not sure where you get off calling me a charity exploiter. Liable can be a rather expensive business.

I've run a business selling goods online for 19 years. I also resale items through brick and mortar via consignment. Many of my goods are acquired at estate and business auctions. One has to be at the right time and the right place with enough money to buy the items. One also needs a place to store the items and transport such as a truck.

I can easily spend 10-12 straight hours hours attending a single auction just to acquire large lots of goods and we are even not talking about the time required to haul the items away, store them, sort through the items, possibly recondition them and a host of other expenses in getting the items prepared for resale. Yet you somehow think this just spontaneously happens on its own accord. I provide a service and expect to be reimbursed otherwise the public is free to purchase items for their charity at full retail value as opposed to much lower prices I could offer. The charity is free to pay someone to attend the auction for the same amount of time but that wouldn’t make much sense as they are only after one item whereas I buy practically anything.

A recent example includes a bulk lot of 50 pet related supplies that were part of larger group of items. These items are new and sell on Amazon, eBay and at multiple retail stores such as Wal-Mart for $9.99 plus sales tax. I acquired them for $.40 each. I needed to haul them home, store them, wipe some dust off some unit’s sealed outer packaging, photograph and properly inventory the items. So are talking a total consumer retail value of $534.47 with sales tax included.

I could put these items in one of the consignment shops I do business with at a price of $7.00. The shop would take 30% but handle all the sales and immediately open up storage space here, leaving $4.90 per unit in gross profit or $245.

I could instead list them on eBay at a BuyItNow item for $125 which includes delivery to a local animal shelter. The leaves $75.40 gross profit for my time. The drive to the animal shelter will take an hour of my time.

So the consumer is able to donate over $500 of gods for $125. The charity gets free supplies. I am able to recover my expenses. Yet you think I am someone exploding the charity. I am providing a service just like any other business. When a electrician or plumber does work for the charity are they exploiting the business when they actually send them a bill for their work. Are the employees of the animal shelter expected to work for zero wages then too?



I am not involved in what the buyer would deduct, but the fair market value can easily be established by examining what multiple other websites and brick and mortar shops are selling the same item for. The buyer is only obtaining the goods for the charity at below market value because I am donating profits I would normally generate on the items.



But what are rules for purchasing items at below market value? A $150.00 items purchased for $50.

There is a local retired wealthy businessman in his 80s that regularly purchases items at auctions at below market value so he can write them off a much higher market value when he donates the items. Close examination of the books show a lot of them will actually end up in the recycling bing at Goodwill as they have damage. This dude even purchased a local building under the guise of trying to resell some of these goods. This was a scam to write off business expenses. He has purchased vintage local country history books and then donates them to colleges at a value of hundreds of dollar each. In the past these books were actually worth several hundred dollars each because people purchased them for genealogical research in the days before the internet; however, many are now available for free from Google Books as they are in the public domain thus they are not that valuable anymore.

We even have some people who hang around auctions to pick up goods that no one wants. These vultures then haul them to the local Goodwill and to get a receipt for a charitable deduction. I guess they are donating their time.

Not sure where you get off calling me a charity exploiter. Liable can be a rather expensive business.

I've run a business selling goods online for 19 years. I also resale items through brick and mortar via consignment. Many of my goods are acquired at estate and business auctions. One has to be at the right time and the right place with enough money to buy the items. One also needs a place to store the items and transport such as a truck.

I can easily spend 10-12 straight hours hours attending a single auction just to acquire large lots of goods and we are even not talking about the time required to haul the items away, store them, sort through the items, possibly recondition them and a host of other expenses in getting the items prepared for resale. Yet you somehow think this just spontaneously happens on its own accord. I provide a service and expect to be reimbursed otherwise the public is free to purchase items for their charity at full retail value as opposed to much lower prices I could offer. The charity is free to pay someone to attend the auction for the same amount of time but that wouldn’t make much sense as they are only after one item whereas I buy practically anything.

A recent example includes a bulk lot of 50 pet related supplies that were part of larger group of items. These items are new and sell on Amazon, eBay and at multiple retail stores such as Wal-Mart for $9.99 plus sales tax. I acquired them for $.40 each. I needed to haul them home, store them, wipe some dust off some unit’s sealed outer packaging, photograph and properly inventory the items. So are talking a total consumer retail value of $534.47 with sales tax included.

I could put these items in one of the consignment shops I do business with at a price of $7.00. The shop would take 30% but handle all the sales and immediately open up storage space here, leaving $4.90 per unit in gross profit or $245.

I could instead list them on eBay at a BuyItNow item for $125 which includes delivery to a local animal shelter. The leaves $75.40 gross profit for my time. The drive to the animal shelter will take an hour of my time.

So the consumer is able to donate over $500 of gods for $125. The charity gets free supplies. I am able to recover my expenses. Yet you think I am someone exploding the charity. I am providing a service just like any other business. When a electrician or plumber does work for the charity are they exploiting the business when they actually send them a bill for their work. Are the employees of the animal shelter expected to work for zero wages then too?



I am not involved in what the buyer would deduct, but the fair market value can easily be established by examining what multiple other websites and brick and mortar shops are selling the same item for. The buyer is only obtaining the goods for the charity at below market value because I am donating profits I would normally generate on the items.



But what are rules for purchasing items at below market value? A $150.00 items purchased for $50.

There is a local retired wealthy businessman in his 80s that regularly purchases items at auctions at below market value so he can write them off a much higher market value when he donates the items. Close examination of the books show a lot of them will actually end up in the recycling bing at Goodwill as they have damage. This dude even purchased a local building under the guise of trying to resell some of these goods. This was a scam to write off business expenses. He has purchased vintage local country history books and then donates them to colleges at a value of hundreds of dollar each. In the past these books were actually worth several hundred dollars each because people purchased them for genealogical research in the days before the internet; however, many are now available for free from Google Books as they are in the public domain thus they are not that valuable anymore.

We even have some people who hang around auctions to pick up goods that no one wants. These vultures then haul them to the local Goodwill and to get a receipt for a charitable deduction. I guess they are donating their time.

The local retired businessman can only deduct them at the price he paid for them. He cannot deduction them for their full MSR price...or even their FMV. He can only deduction them at the price he paid for them. That is where your idea falls apart. Now, if the local retired businessman would be donating to the animal shelter anyway, the local retired business person might be pleased to get a good deal on items the shelter needs, but he still doesn't get to donate at a price higher than he paid.

 

[Mass_Shyster]

Not sure where you get off calling me a charity exploiter. Liable can be a rather expensive business.

Love internet tough guys.

 

[LdiJ]

Love internet tough guys.

There is also the whole "libel" vs "liable" bit too.

 

[pumpkinpies]

The local retired businessman can only deduct them at the price he paid for them. He cannot deduction them for their full MSR price...or even their FMV. He can only deduction them at the price he paid for them. That is where your idea falls apart. Now, if the local retired businessman would be donating to the animal shelter anyway, the local retired business person might be pleased to get a good deal on items the shelter needs, but he still doesn't get to donate at a price higher than he paid.

Actually no. He is deducting them near or at the fair market value established within guidelines published by Goodwill, Salvation Army and other charities.

https://www.goodwill.org/wp-content/uploads/2010/12/Donation_Valuation_Guide.pdf
He might pay few dollars for 200 books and then writes them off $.50 to $1.00 each. At $.50 that is a $100 deduction. I've seen entire pickup loads of books go for $2.50 because the auctioneer has to get them out of the building to make room for more estates and it saves the auctioneer labor having to throw them away. The last auction I attended almost every single items old there was being bought by eBay resellers for pennies on the dollar. I feel sorry for the family having to get rid of items - they got ripped off by the auctioneer.

You mean to tell me if someone purchases a item for $1900 but its worth $8,000 due to its rarity that person can only deduct $1900. That makes no sense. The books are the same as the $1900 item. He purchased them far below market value. He was able to purchase the books at such a low value because this is rural area and there are few poeple attending the auction. This guy even purchased a former store and for several weeks he was trying to sell some of the books via a rummage sale before getting rid of them at a local charity - no doubt so he could claim further writeoffs for the building.

Love internet tough guys.

And you know how everyone loves (hates) lawyers don't you?

 

[Just Blue]

And you know how everyone loves (hates) lawyers don't you?

Why do you believe anyone who responded to your thread is an attorney? Please read the "Important Notice" at the bottom of this page. Thank You.

 

[justalayman]

I am not involved in what the buyer would deduct, but the fair market value can easily be established by examining what multiple other websites and brick and mortar shops are selling the same item for. The buyer is only obtaining the goods for the charity at below market value because I am donating profits I would normally generate on the items.

You wouldn’t be donating anything. You would be selling items and delivering them to the charity on behalf of the buyer. The buyer is donating, not you.

And the buyer isn’t donating them at an value other than what he paid for them. Charitable donations are intended to be just that, not a means to scam the tax man by claiming a person donated more than they really did.

 

[Mass_Shyster]

And you know how everyone loves (hates) lawyers don't you?

Really? I never knew that people dislike lawyers. I though shyster was a term of endearment.

 

[Just Blue]

Really? I never knew that people dislike lawyers. I though shyster was a term of endearment.

It is Yiddish for "Dear Heart"...

 

[Taxing Matters]

You mean to tell me if someone purchases a item for $1900 but its worth $8,000 due to its rarity that person can only deduct $1900.

That is indeed what the tax law provides on donation of property that have appreciated if the item would not result in a long term capital gain if it had instead been sold on the day it was donated. More specifically, if the item would result in ordinary income or short term capital gain if it had been sold on the date of donation then the taxpayer may only deduct the fair market value (FMV) of the item less the gain he or she would have realized had he or she sold the item. On the other hand, if the item, had it been sold that day, would have resulted in a long term capital gain then the taxpayer may generally use the fair market value for the donation. See the discussion of this starting on page 11 of IRS Publication 526.

What that rule means is that in your ebay example of buyers buying items that are immediately then donated to charity on their behalf but that have a fair market value of more than they paid then all they'll be able to deduct is what they paid since the difference between what they paid and fair market value would be a short term capital gain and they must subtract that gain from the FMV of the donated item to determine the amount they may deduct. So, using your example, the buyer buys an item for $1,900 but it is worth $8,000 FMV and is immediately donated to the charity. The amount of gain had the buyer sold it instead for FMV would be $8,000-$1,900 = $6,100. So the donation then is limited to $8,000 FMV less the $6,100 that would have been realized = $1,900. As you can see, the math works out to be what the buyer paid for it.

That rule makes perfect sense in this case. All the buyer is out of pocket here is $1,900. That's all that was spent for the donation, and thus that's all that she should be allowed for the deduction. It would be the same as if that $1,900 was donated in cash. The outcome for the taxpayer is exactly the same whether it's the item bought for $1,900 or a cash donation is made for $1,900 and since both of those are economically the same for the taxpayer they ought to result in the same deduction.

 

[PayrollHRGuy]

The short version being the IRS doesn't let one deduct for opportunity costs.