Are they really business donations?
A business asks it's customers to buy items from their store, and pay for them mind you, and place them into a donation basket for a good charity. The...
A business asks it’s customers to buy items from their store, and pay for them mind you, and place them into a donation basket for a good charity. Then the store manager turns in the "donation", gets a receipt from the charity, and uses it for a tax deduction. How right is this? Is it wrong? Give me your opinion. 10 points to the one who makes me believe their point of view!
Emilie: You didn’t answer the question, it happens all the time in the area where I live. I’m just wondering if people think this is a right thing to do or if it’s really cheating since the store received $ for the "donated" items.
Devil: That’s not an answer either, are there any intelligent people on here? Someone?
LEGALLY it is OK, ethically and morally is a different question. I personally do not think that it it either. That is very similar to getting a gift from someone that states "A donation in your name has been made to XXX Charity. Merry Christmas." You get nothing, but the person who made the donation in your name gets the tax write-off.
As an Accountant I can see what you mean. They take the product purchased from the customer and donate it to a charity and then take the donation as a write-off for income tax filing purposes.
One has to look at things:
1. How responsible is this
2. Should the law allow for this kind of mistreatment of the tax system
3. What really can be done about it
4. Would not doing so prevent charitable activities to needy organizations
When it comes to Item #1, I think it is not very responsible at all. I mean it really defeats the purpose in the end if the company does this.
Ethically the business is most likely in violation of the Internal Revenue Code by taking the donation if they claim the donation on their tax returns. Legally the rightful owner of the product is the one who bought it placed it in the basket and they would in the end maintain rights to such products. By placing it in the Store’s basket this not in my opinion transfer rights to the Store to be able to take the donations as a qualified business deduction on their tax returns.
The IRS should not allow such matters to happen and fully administer the tax code in this area to prevent abuse and misappropriations of the rights in relation to donated items and associated transferance of those rights.
The only deduction, even if that may be the case that the company could logically take under this scenario above in my opinion would be maybe, and that’s really a big maybe of the mileage or gas used to deliver the donated items to the donation organization.
Even then, does the auto and gas expenses, really in the end, when all factors are considered, qualify for a logical business donation deduction, or one that may transfer to the personal returns of the companies principles who are responsible for claiming profits and losses on their returns; such as with the case of an S-Corp. who would claim it say as a separate line item deduction on Sch. A of their return due to the flow-through (pass-through if you will) entity status of the S-Corp itself. In the case of the Partnership would they be considered for example UPE (Unreimbursed Partnership Business Expenses) showing up on Sch. E of 1040 for example. I would not think so.
In either case, the issue we come to in applying the Code would be the lack of participation inherent with needy organizations. Would stores still set out or allow the donation baskets, or crates, cartons, etc. that are used to collect the donations. Then again, in other ways it may not affect them at all anyway.
When I say this I am assuming that the Business likes to look good. It makes them look good to participate in community activities. Shoppers see the basket, think perhaps oh that’s so nice of them to do that.
In the end, enforcement would probably not create issues in most cases for the donations. It is like a big red flag to shoppers. Look we support local food banks. We support the community buy the products for donation and we’ll take it to them.
In the end, enforcement should be considered in such cases. Business owner’s should not be able to openly violate the code when many of the people who do make the donations may not be able to write them off anyway. If the Donor said to the Business, look you are given the rights to use the product as you wish; maybe ten we could have a proper discussion on whether or not the transferance of those rights again apply and therefore later transfer so that the business can then claim the donation.
The shopper is not transferring rights to the store. Merely the transfer is okay I trust you to deliver the product to the necessary organization; not here my rights are given to you, take the donation and claim it and pay less taxes so you can build larger stores and put in your fancy tile and Starbucks when you do.
Ethical considerations should be assumed. Taking donations in such cases in our opinion violates the Internal Revenue Code as Codified under The Federal Register and United States Code and enforcement should be taken up on abuses.