Tax quiz (Jack Bog's Blog)

Two questions, 50 points each.

Question 1: You send your check for $10,000 to the University of Oregon. You write "donation" on the check. But you make the gift conditional on the $10,000 being used to fund a scholarship for your niece, who's a student at the U of O. Do you get to take a charitable contribution deduction for the $10,000 on your income tax returns?

Answer: No. As the IRS explains in Publication 526:

You cannot deduct contributions to specific individuals, including the following.
* Contributions to fraternal societies made for the purpose of paying medical or burial expenses of deceased members.

* Contributions to individuals who are needy or worthy. This includes contributions to a qualified organization if you indicate that your contribution is for a specific person. But you can deduct a contribution that you give to a qualified organization that in turn helps needy or worthy individuals if you do not indicate that your contribution is for a specific person.

Example. You can deduct contributions for flood relief, hurricane relief, or other disaster relief to a qualified organization. However, you cannot deduct contributions earmarked for relief of a particular individual or family.

* Payments to a member of the clergy that can be spent as he or she wishes, such as for personal expenses.

* Expenses you paid for another person who provided services to a qualified organization.

Example. Your son does missionary work. You pay his expenses. You cannot claim a deduction for your son's unreimbursed expenses related to his contribution of services.

* Payments to a hospital that are for a specific patient's care or for services for a specific patient. You cannot deduct these payments even if the hospital is operated by a city, state, or other qualified organization.

Question 2: You send your check for $10,000 to the University of Oregon. You write "donation" on the check. But you make the gift conditional on the $10,000 being used to fund a controversial severance package being paid to the university's departing athletic director. Do you get to take a charitable contribution deduction for the $10,000 on your income tax returns?

Answer:

Comments (13)

I think "you" (cough, Phil, cough) could make a more convincing claim in the latter example, as you could argue that the severance package was a standard part of the athletic department's compensation package, and that as a donor you are interested in helping the department with a variety of expenses.

Moreover, the IRS says you cannot deduct money earmarked for "relief" of a person, meaning expenses they might incur, like tuition. The severance package would not fit into this category.

Posted by Dave J. | April 7, 2010 9:24 AM

Still no. And go by streetcar for trying that stunt!

Posted by Don | April 7, 2010 9:33 AM

Yes, the deduction is allowed, if phrased properly:

"You cannot deduct contributions to specific individuals, including the following: Funds for Mike Belotti's severance package."

So the deduction would need to be made something like: "...for general UofO Athletic Dept severance packages of general athletic personnel who shall not be named (wink, wink)."

Not unlike all the other laws we have, it depends on the legal wording (and the definitions of various words ie "is")

Posted by Harry | April 7, 2010 10:35 AM

$10,000? No. $10,000,000? No doubt.

Posted by Allan L. | April 7, 2010 12:50 PM

Ha, Ha, Ha!! It's funny how much effort is going into the investigation of this when most, maybe all, of the $$ are coming from donors. At least it gives Beaver Nation something to be giddy about while their best players figure out where they should transfer to.

Posted by Gary | April 7, 2010 1:20 PM

Gary, is the athletic department completely self-funded by donors? Do they receive ANY tax dollars? If they do, you can't argue that the money is coming from "only donors" since it is fungible. In the absence of the severance package, the donor funds could have been used for something else, offsetting the taxpayer dollars.

Posted by Miles | April 7, 2010 1:41 PM

$10,000 is relief. $2,500,000 is winning the lottery. Lottery winnings are taxable.

Posted by Isaac Laquedem | April 7, 2010 1:51 PM

Miles: I see your point. But I don't think they are reaching into a pool of contributions and paying this. My understanding from the articles is that large contributors have agreed to pay an additional amount that will be used to satisfy the amount promised to Belotti. So I'm not sure that they should be considered fungible.

Agreed that the deduction will reduce these contributors taxes, but I don't know how you fix that. Maybe no deduction should be allowed for any contribution to college sports programs. At most universities all programs except football are contributing to budget problems.

Posted by Gary | April 7, 2010 3:16 PM

I agree with Harry's take on this. Although you can't deduct a donation that is earmarked for a specific individual, you can deduct it by carefully wording the conditions attached to your donation. Or, you could just make the check out to the UO Athletic Fund in full knowledge that as the college's largest donor, they're going to follow your verbal instructions on how to use the donation.

Posted by Pat | April 7, 2010 3:43 PM

If the taxpaying public asks where the money comes from, the U of O is going to say that it came from donors who designated it to go to Bellotti. Once you say that, the IRS has got the donors right where it wants them.

Posted by Jack Bog | April 7, 2010 8:25 PM

Fourth and long.

Posted by Mojo | April 7, 2010 11:55 PM

Yes for the deduction- if you are a Democratic Cabnet member

Posted by brother gary | April 8, 2010 9:11 AM

Miles, my understanding is that, yes, the entire UO athletic department is self-sufficient; it does not receive any money from taxpayers or tuition-payers. (The student government does spend some student fees to buy tickets from the athletic department, which they in turn distribute to students.)

None of that excuses the sloppiness of not having a written contract for Bellotti, of course.

Posted by Rulial | April 8, 2010 3:15 PM

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Wednesday, April 7, 2010

Tax quiz

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