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September 27, 2012


Marys Cakes

Thanks for your comments Jennifer, they are quite informative!


I made a typographical error in the above post...it should state "then they can deduct $25 since that went to the charity without them receiving compensation."


I have a couple comments regarding this post.

First, the part about the purchaser the card deducting the cost they paid for the card...this is not necessarily correct. The purchaser of the card can deduct the amount of the card over and above the benefits they receive from the card. So, if they purchase a $50 card for $50 they cannot deduct anything, however if they purchase $50 gift card for $75, then they can deduct $50 since that went to the charity without them receiving compensation.

Second, while I am sure the strategy you employ is fine for you, your post may be misleading to others in business who may wish to employ tax deductions for their charitable contributions. You may actually be able to deduct the value of the cards rather than expense the cost of the raw goods as a business expense. It may work out better for you to pass this through to your personal return (in the case of a partnership, a limited liability company, or an S corporation) or if you are set up as a C Corp (regular corporation) you can deduct them on the business return. I would talk to your accountant about structuring your donations in the optimum way since you seem to be giving a lot to charity. It would behoove you to structure your business donations in a way for maximum value since the business is effectively losing money when it does not take the deductions. There are many businesses which are able to benefit from the tax deduction to charity and help charities at the same time. If it is possible, you may want to structure things so that yours is also.

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