Benefit auction guidelines

Benefit auctions are a fun and profitable way to involve a large number of persons in the fund raising process. However, if charitable contribution receipts are to be issued for donated items and/or amounts donated through the purchase of goods and services, the receipts must be issued by a charitable 501(c)(3) organization exempt from federal tax (such as a church or non-profit charity), and certain steps must be carefully followed in order for the receipts to be recognized by the IRS.


Donated items

When donated items or services are received for sale at the benefit auction, the donor should be asked for the fair market value of the item or service – the amount he/she would reasonably expect the item to sell for on the open market – of their contribution(s). This value is not mentioned on the donor’s receipt but should be retained and later inserted as the fair market value on the purchaser’s receipt.

All receipts for items donated for sale at a benefit auction must contain:
  • Donor’s name and address
  • Date item was received
  • Name and address of the charitable entity receiving the donation
  • Signature of the receiving entity
  • Detailed description of the donated item without mention of the item’s value
    • Example: Matted and framed 12” x 16” watercolor of covered bridge painted by donor
    • Example: Ethiopian meal for 10 persons in the donor’s home
    • Example: Basket of two dozen chocolate chip cookies with eight hot-chocolate mix packets
  • Statement that the “donor did not receive any goods or services in exchange for this gift”

Purchased items

IRS charitable-contribution guidelines allow the purchaser of auctioned items to claim as a tax deduction only the amount paid in excess of an item’s fair market value. Therefore, the receipt must show the following:
  • Purchaser’s name and address
  • Date of auction
  • Name and address of the auction sponsor
  • Signature of the auction sponsor
  • Detailed description of each purchased item
    • Example: Matted and framed 12” x 16” watercolor of covered bridge by John Doe
    • Example: Ethiopian meal for 10 persons in the home of Jane Doe
    • Example: Basket of two dozen chocolate chip cookies with eight hot-chocolate mix packets
  • Amount paid for each item
  • Fair-market-value for each item or service (the amount you would reasonably expect the item to sell for on the open market) -- this information should have been obtained when the item was donated for sale.
  • Amount paid in excess of the fair-market-value (the difference between the amount paid for each item and its fair-market-value), which is the amount the donor may claim as a tax deduction. This amount should be referenced with the statement “donor did not receive any goods or services in exchange for this gift.”

Sample receipt for auction purchase

Benefit Auction Receipt
[Name of auction sponsor]
[Address of auction sponsor]

Date: ____________________

Issued to: _________________________________________________________
                (Name)
                __________________________________________________________
                (Address)

Item purchased:__________________________________________________

                                    $__________ Amount paid
                             less $__________ Fair market value
                                    $__________ Charitable contribution*
                     Purchaser did not receive any goods or services in exchange for this gift.

[Auction sponsor] is a nonprofit, charitable corporation exempt from federal tax. Consequently, this donation, in excess of the fair market value, represents a legitimate charitable deduction for federal tax purposes to be claimed by the purchaser for the year 20__.

*Note: The charitable contribution is limited to the amount of your payment which was in excess of the fair market value of the goods or services you purchased.

 __________________
Authorized Signature
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