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Transcript of Video on Giving Benefits in Exchange for Contributions

Political entities sometimes give contributors a benefit or a gift for making a contribution. And sometimes the value of that benefit has to be deducted from the amount given to arrive at the actual contribution amount. This module explains why and when to deduct the benefit's value from the donated amount.

First, you need to ask: Is the benefit central to the fundraising activity? In other words, did the person contribute to get a particular benefit? If the answer is yes, the benefit's value is deducted to arrive at the actual contribution amount. Let's say you rent a curling rink for $400 and sell tickets to play for $100. The rental cost per person, based on expected attendance, is $10. Curling is central to the fundraising activity, so $10 is deducted from the amount given and the contribution is $90.

But the benefit is not always central to the fundraising activity. If it isn't, you need to ask: Is the benefit significant? A benefit is significant only if its fair market value exceeds 10% of the amount given or $75, whichever is less. Let's say contributors receive a keychain for a $100 contribution. The keychain cost you $5 and it is not central to the activity—people didn't contribute because they wanted the keychain. The $5 does not exceed 10% of the amount given or $75, so nothing is deducted, and the contribution is the full $100. But let's say you give a $20 backpack for a $100 contribution. Even if the backpack is not central to the activity, the value is significant: it exceeds 10% of the $100 given. So the $20 is deducted, and the contribution is $80.

How do you determine the value of the benefit? Use its fair market value. This is generally the amount you paid a commercial provider for the property or service—in other words, the retail price.

Now what happens if a benefit is not commercially available and its value can't be determined? For example, what if for giving $1,000, contributors get to meet a prominent candidate? This benefit has no fair market value, so the full $1,000 is a contribution. Here's an important note: If the fair market value of the benefit can't be determined, the contribution is not eligible for a tax receipt, though it is still subject to the contribution limit.

To learn more, please take a look at our other modules and resources.

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