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Is this a Bargain Sale GIK?

  • 1.  Is this a Bargain Sale GIK?

    Posted 09-18-2024 09:15 AM

    Hello,

    We have a vendor that many of our athletic programs use to buy promotional items - branded mugs, cups, golf balls, things of that nature. The athletic teams give these away at various events they run (golf tournaments, alumni games, etc.). 

    The foundation pays for these items out of the general operating accounts we have for each sport. The vendor has started requesting a Gift in Kind for discounted pricing. According to the vendor website, the prices of each item vary depending on the quantity purchased. To use a made up example - if you purchase 10 mugs the price is $1 per mug, if you purchase 50 mugs, the price is .50 cents per mug. The vendor simply gives us the cheapest per unit unit price, regardless of the quantity we purchase and then notes the total discount on the invoice. The discounts is usually fairly substantial ($500+). 

    Would this count as a bargain sale gift in kind, or does that only apply to real estate and things of that nature? Or would this be something we should just handle as "recognition" credit only. The owner of the company is an alum of our institution so I think we'd have to recognize the company in some way for these discounts no matter what.

    Thanks for any input!



    ------------------------------
    Tioga Anderson
    East Stroudsburg University Foundation
    tanderson@esufoundation.org
    ------------------------------


  • 2.  RE: Is this a Bargain Sale GIK?

    Posted 09-18-2024 09:38 AM
    What you have described sounds like a bargain sale. However, Counsel may need to look at the contract to ensure the reduced pricing is not tied to a long-term exclusivity agreement. That sort of language would nullify any deductibility.

    John

    John H. Taylor
    919.816.5903 (Cell/Text)

    Big Ideas; Small Keyboard





  • 3.  RE: Is this a Bargain Sale GIK?

    Posted 09-18-2024 09:52 AM

    Hmmm.  If the vendor website lists these as bulk-volume discounts available (presumably) to anyone, that doesn't sound like a charitable bargain sale, does it?

     

    My US$0.02 worth; the usual disclaimers apply.

     

    Good luck!

    Alan

     

    Alan S. Hejnal (he/him)

    Data Quality Manager

     

    SNAGHTML5cbfa34

     




    Original Message


  • 4.  RE: Is this a Bargain Sale GIK?

    Posted 09-18-2024 10:00 AM

    Yes, but we get the purchased 50 mugs price when we only purchase 10 mugs. Everyone else who purchases 10 mugs would pay more than we do.



    ------------------------------
    Tioga Anderson
    East Stroudsburg University Foundation
    tanderson@esufoundation.org
    ------------------------------

    Original Message


  • 5.  RE: Is this a Bargain Sale GIK?

    Posted 09-18-2024 10:06 AM

    So it sounds like a bargain sale if you buy 10 mugs at the 50-mug price, but not if you buy 50 mugs?

     

    My US$0.02 worth; the usual disclaimers apply.

     

    Good luck!

    Alan

     

    Alan S. Hejnal (he/him)

    Data Quality Manager

     

    SNAGHTML5cbfa34

     




    Original Message


  • 6.  RE: Is this a Bargain Sale GIK?

    Posted 09-18-2024 10:25 AM

    Yes, I would assume there would be no discount if we purchased the highest quantity. But that's never happened - the highest quantity available is always much greater than what we buy, and I don't anticipate we'd ever get anywhere near purchasing the highest quantity available.



    ------------------------------
    Tioga Anderson
    East Stroudsburg University Foundation
    tanderson@esufoundation.org
    ------------------------------

    Original Message


  • 7.  RE: Is this a Bargain Sale GIK?

    Posted 09-18-2024 10:33 AM
    I'd be cautious about treating this as a bargain sale (the contract review notwithstanding). The vendor has already established the amount you are paying as a "fair market value" - limited to larger purchases. It's sort of like an unadvertised special. Publication 526 defines a bargain sale as "a sale or exchange for less than the property's FMV."

    Since some can buy the items at this level, that establishes the FMV-at least, that is how I see it.

    John
    John H. Taylor, Principal
    John H. Taylor Consulting, LLC
    2604 Sevier Street
    Durham, NC     27705

    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987





    Original Message


  • 8.  RE: Is this a Bargain Sale GIK?

    Posted 09-18-2024 12:41 PM

    Ok, I see your point there. Does the fair market value change depending on the quantity you buy? They'd have to discount it even further than the lowest amount they would ever charge for it to be considered a bargain sale. Basically, they are still making a profit off these transactions, just not as much as they normally would. But there is no harm in recognizing the company for these discounts, sending a letter thanking them for the discount and then whatever they try to claim tax wise would be on them?



    ------------------------------
    Tioga Anderson
    East Stroudsburg University Foundation
    tanderson@esufoundation.org
    ------------------------------

    Original Message


  • 9.  RE: Is this a Bargain Sale GIK?

    Posted 09-18-2024 12:49 PM
    The IRS defines fair market value this way (IRS Publication 561, page 2): "FMV is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts."

    So, yes, I guess the FMV can be "variable." But the key is the phrase "sell for on the open market." This vendor has set that bar low.

    There's no harm in thanking the vendor. And, if the savings is material to your organization, you may consider entering a soft-credit recognition amount on your system.

    However, they could not claim a charitable donation deduction as you would not issue a gift receipt. On the other hand, they may be able to claim some business deduction.

    John

    John H. Taylor, Principal
    John H. Taylor Consulting, LLC
    2604 Sevier Street
    Durham, NC     27705

    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987





    Original Message


  • 10.  RE: Is this a Bargain Sale GIK?

    Posted 09-18-2024 01:04 PM

    Alright, I think I'm just going to give them recognition credit so they get the appropriate recognition/stewardship and send them a non-gift receipt letter thanking them for giving us a discount (without mentioning how much the discount was for). Thank you!



    ------------------------------
    Tioga Anderson
    East Stroudsburg University Foundation
    tanderson@esufoundation.org
    ------------------------------

    Original Message


  • 11.  RE: Is this a Bargain Sale GIK?

    Posted 09-18-2024 10:01 AM
    Edited by Tioga Anderson 09-18-2024 10:03 AM

    Thanks, I'm not aware of any exclusivity agreements, but I will double check on that. I think he just does it because he's an alum and has an affinity for athletics, and he knows their budgets are tight.



    ------------------------------
    Tioga Anderson
    East Stroudsburg University Foundation
    tanderson@esufoundation.org
    ------------------------------

    Original Message


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