Charity auction portrait donations and taxes

[Debra Jones]

I have had the best marketing results with the donation/demo. When I donate a $200 small portrait or equal value TOWARD a larger piece, not only have I had my bread cast upon the water come back doubled as in a $650 piece hence the $450 income, but the charity has seemed to always get full market value for the donation. Just two weeks ago, I was auctioned with a "buy it now for 120%" and they got $240 for me! The buyer whispered he was upgrading and had even explained the subject (taboo: pet) had been painted a couple of times before by high end painters but had not captured what he saw in the eyes of his animal. My demo on the spot (of a human and his jet, not a puppy, by the way) showing my technique and process as well as a few pieces worked wonders.

I have stopped papering the donation market, as the tax benefit is a scam. I have donated to charities I believe in and found some karmic boon from the experience.

Final thought.

If you have a patron pursuing you for a donation, explain the tax problem and tell them they can buy a sample piece FROM you which they may donate. Or, I suppose, the gift certificate which will net them the tax break and you the business.

I kind of believe in the charity part of it so I never regret the loss of business. Only if nobody redeems it. I would be painting SOMETHING anyway, why not help a cause?
dj*

[Michele Rushworth]

Stanka wrote:

...auctions have provided my business the necessary kick start when I began to focus on portraiture.

Same here!

My tax accountant has advised me that I may deduct the donations at fair market value as "advertising expense" (not as charitable donations, due to the above mentioned tax laws). That is how I have handled these donations for the past two tax years.

[Garth Herrick]

Originally Posted by Michele Rushworth

My tax accountant has advised me that I may deduct the donations at fair market value as "advertising expense" (not as charitable donations, due to the above mentioned tax laws). That is how I have handled these donations for the past two tax years.

Thanks Michele!

That is very useful to know. I wish I thought of that before e-filing several days ago. Maybe in this case one should send a revised tax form with the advertising expense changes.

[Joan Breckwoldt]

I suppose there is no logical answer to this question but I'll ask it anyway. I have yet to donate a portrait at an auction though I did sign up to donate a painting (of some kind) at our church's upcoming auction (in September so I've got some time). It'll be great exposure, tax advantage or not. And apparently there's NOT from reading the previous posts.

Here is my question, if someone donates a charcoal drawing for $200, doesn't the artist then get to write off the $200? Especially if the true market value is proven by someone paying $200? And if the artist donates a large oil portrait that would normally sell for $5000 (hypothetically speaking!), why, in heaven's name wouldn't the artist be able to deduct the $5000? I'm going to donate some other items (not art related) so it'll be interesting to see who sets those prices, I was planning on filling out the value myself, just like when I drop off things at Goodwill and the local church resale shop. I used to volunteer at the resale shop and the DONOR would fill in their own values. Doesn't make a lot of sense to me . . .

We even had someone bring in an oil painting to the resale shop and put the value of their donation at $2000. This caused a problem since the painting was something from a garage sale. (Not that you can't find great things at garage sales, my point is that it was a nothing painting and the donor did this as a tax scam.) I'm off the subject now.

I suppose next year our tax accountant can explain all this. And Michele, what a clever tax accountant you have. I will remember your tip.

Joan

[Debra Jones]

My understanding is that you can only deduct your expenses. If you were a bricklayer and donated a patio you can only deduct the cost of bricks and mortar, for which you have a real value and receipts, but you are on your own for the labor.
In my state, and I have attended two seminars on both problems, the city wants sales tax on portraits because there is a lot of art income. It is specifically noted. The state has two points of view. It is a tangeable good, so it should be taxed, but since it is commissioned, as in the client decides size, subject and materials, it is a service and only declare the service of painting it as income.

If you donate $200 to an auction and deduct it, and the buyer donates $150 to buy it and deducts it, there is not a real market value (and somehow both of you are deducting the same actual goods) IF you give the picture to your accountant and a bunch of brochures, and he tells all of his clients to go get a painting done and hands out a card with every tax return, the painting is a business expense, as a display piece would be, for advertising and a whole different ball of wax.

Well, that is how I understand it and I am sure some one else will set me straight soon.
dj*