FundSvcs Community

No payment for a game of chance is a tax-deductible gift. See IRS Publication 526.

John

Regarding the discussion about the potential raffle organized to name a cottage on campus, I strongly advise against it. The implications of such an action are concerning, particularly since we cannot predict the outcome of who or what the cottage might be named after. This could potentially lead to ethical dilemmas or result in an unsuitable name being chosen.

We once held a contest to name an NC State building located off-campus. Unfortunately, this initiative proved to be highly problematic. Despite the donor's request for a contest to determine the building's name, the results were far from satisfactory. Many of the suggested names were inappropriate, while others lacked coherence. When the Dean selected one of the options, I had to intervene and reject it despite my uncertainty about my authority to do so. Notably, the chosen acronym spelled out "RAW Creamery." Eventually, the building was named something entirely different, disregarding the options presented in the contest.

Given our past experience, it is evident that leaving the naming process to chance or public opinion can lead to undesirable outcomes. Therefore, I urge caution and deliberate consideration before proceeding with any similar endeavors in the future.

I guess I have a question regarding an earlier comment.

I've read several IRS and tax authority comments regarding games of chance. Nowhere do I find a reference to those games having to result in winning cash or a tangible benefit. All the commentary I can find state that the IRS refers to raffles as a form of gambling and not a charitable donation. You are paying to play - regardless of what you might win.

Is there something somewhere that says raffles for intangible benefits are not games of chance?

John

The (very) short version is that the IRS doesn't itself explicitly define a game of chance. Rather, it follows state laws and common law for gaming/gambling/lottery definitions. While language varies, the typical state definition of a game of chance includes the element of value, eg Ohio's: "a game in which a player gives anything of value in the hope of gain, the outcome of which is determined largely by chance" , all of which follow the common-law definition of the three elements of games of chance, which are chance as a major factor, consideration (ticket purchase or contest submission), and  a prize of tangible value. 

Put another way, if nothing of value is being offered to donors, the only intent that they could have for giving money is a charitable intent.

John H. Taylor 

All of this is exercises in absurdity, in the sense that naming rights are, factually speaking, of substantial economic value. Famously, Avery Fisher gave Lincoln Center $10.5m as one of the first 'naming rights' contributions in 1973, for Avery Fisher Hall. The naming rights were sold back to the charity by his heirs in 2014 for $15m, plus other lesser naming rights. The IRS has nevertheless decided that these rights are insubstantial when purchased. However, given the IRS's proven ability to be inconsistent, maybe you're right that the IRS would nevertheless find it objectionable to take a deduction when the rights are raffled off.