FundSvcs Community

Hmmm.  I would have thought that there are two separate issues here, which need to be delineated.

One issue is whether the university giving these gift cards to its employees creates a taxable benefit for the employees.  That's not my area of expertise, but it seems plausible to me that it does.

But why ever would we think that the fact that the gift cards being a taxable benefit to employees means that their contribution to the university would be a deductible contribution for the casino?  Those are entirely separate parts of the tax code.

This seems to me analogous to the issues related to contributions for a charitable auction.  In a charitable auction, there are two separate transactions, the auction purchase of the item and the earlier contribution to the university of that item.  An auction purchase of contributed services or of a partial interest (say, a voucher for airfare that had been donated by an airline, or the use of a vacation home donated by its owner) clearly represents a valuable consideration that reduces the deductible part of the winning bid.  However, when we consider whether the earlier contribution of the service or of the partial interest represents a tax-deductible contribution by the airline or by the vacation home owner, that doesn't matter at all.  Rather, the evaluation of the contribution of the service or partial interest is evaluated like any other contribution of services or of a partial interest, and there is no deductible charitable contribution.  The rules for a charitable contribution say that there must be the non-reciprocal transfer of cash or of property other than cash, and neither contributed services nor a contributed partial interest represents a gift of property.  It might seem like there ought to be a linkage, that if the auction winner has their gift reduced by the value of the service or partial interest, the door ought to get a deduction for contributing it, but that is not the case.  There are two transactions, and each is evaluated separately.

It's no different here.  Regardless of what the university does with the contributed gift cards (though the gift cards would have to be used in support of the mission to meet another requirement of charitable contributions), the contribution to the university of the gift cards has to meet the requirements of 26 U.S. Code § 170 for there to be a tax-deductible charitable contribution, regardless of what some other section of the tax code might say about tax implications of what the university subsequently decides to do with the gift cards.  The tax code that governs tax deductions for charitable contributions says that there must be a contribution of cash or of property other than cash.  In evaluating gift cards, that resolves to the question of what is received when the gift cards are redeemed, and, in this case, the gift cards cannot be redeemed for any sort of property--casino play, whether online or in-person, is not property!  So there is no charitable contribution.

It's the same situation as if a supporter contributed the use of a vacation property and, instead of offering it for a charitable auction, the university decided to award it to an employee as a reward for service or some such.  That might well be a taxable benefit for the employee.  But that doesn't magically make it a tax-deductible charitable contribution--there is still no contribution of property.  And the two events still must be evaluated separately.

(Note that the analysis would be different if an individual unrelated to the casino had purchased and contributed the gift cards.)