FundSvcs Community

My understanding is that the 80/20 rule applied only to the right to purchase seating at home athletic contests. 

Back when the 80/20 rule was in force, we periodically discussed that, to evaluate the fair market value of the right to purchase other sorts of seating, we were back in the territory of having to come up with a good-faith assessment of the value of such rights (as challenging as that might be).  The 80/20 rule just applied a special rule for determining the fair market value in that one case, the right to purchase tickets for seating at home athletic event, and it set the value of the benefit at 20% of the amount of the associated contribution.

When the deductibility of the right to purchase seating at home athletic contests under the 80/20 rule was eliminated, the language was just that the deductibility under that section was eliminated, specifically.  Again, there is no impact on any other types of rights to purchase seating not described in that section.

Here's the language:

(l) Treatment of certain amounts paid to or for the benefit of institutions of higher education

(1) In general

No deduction shall be allowed under this section for any amount described in paragraph (2).

(2) Amount described

For purposes of paragraph (1), an amount is described in this paragraph if-

(A) the amount is paid by the taxpayer to or for the benefit of an educational organization-

(i) which is described in subsection (b)(1)(A)(ii), and

(ii) which is an institution of higher education (as defined in section 3304(f)), and

(B) the taxpayer receives (directly or indirectly) as a result of paying such amount the right to purchase tickets for seating at an athletic event in an athletic stadium of such institution.

If any portion of a payment is for the purchase of such tickets, such portion and the remaining portion (if any) of such payment shall be treated as separate amounts for purposes of this subsection.

My US$0.02 worth; the usual disclaimers apply.

My understanding is that the 80/20 rule applied only to the right to purchase seating at home athletic contests. 

Back when the 80/20 rule was in force, we periodically discussed that, to evaluate the fair market value of the right to purchase other sorts of seating, we were back in the territory of having to come up with a good-faith assessment of the value of such rights (as challenging as that might be).  The 80/20 rule just applied a special rule for determining the fair market value in that one case, the right to purchase tickets for seating at home athletic event, and it set the value of the benefit at 20% of the amount of the associated contribution.

When the deductibility of the right to purchase seating at home athletic contests under the 80/20 rule was eliminated, the language was just that the deductibility under that section was eliminated, specifically.  Again, there is no impact on any other types of rights to purchase seating not described in that section.

Here's the language:

(l) Treatment of certain amounts paid to or for the benefit of institutions of higher education

(1) In general

No deduction shall be allowed under this section for any amount described in paragraph (2).

(2) Amount described

For purposes of paragraph (1), an amount is described in this paragraph if-

(A) the amount is paid by the taxpayer to or for the benefit of an educational organization-

(i) which is described in subsection (b)(1)(A)(ii), and

(ii) which is an institution of higher education (as defined in section 3304(f)), and

(B) the taxpayer receives (directly or indirectly) as a result of paying such amount the right to purchase tickets for seating at an athletic event in an athletic stadium of such institution.

If any portion of a payment is for the purchase of such tickets, such portion and the remaining portion (if any) of such payment shall be treated as separate amounts for purposes of this subsection.

My US$0.02 worth; the usual disclaimers apply.

Yes, that's right.  The 80/20 rule came about, as I understand it, because it was hard to determine the fair market value of the right to sit down there rather than up over there.  But that same issue exists with respect to other preferential seating.  It's apparently never risen to the level of concern that the issue with athletic seating did (possibly because it was less common?).

I'm not aware of any guidance for determining the good-faith estimate of the value of the right to purchase preferential seating other than the general "what a willing buyer would pay a willing seller". 

I have sometimes wondered about membership programs that make seats available to members before they are made available to the general public.  Would the membership benefits exception apply in this case (at least when the membership payment is not more than $75)?

Interestingly, I did find this on the IRS website:

No disclosure statement is required if any of the following is true:

[...]

4. The donor makes a payment of $75 or less per year and receives only annual membership benefits that consist of:
• Any rights or privileges (other than the right to purchase tickets for college athletic events) that the taxpayer can exercise often during the membership period, such as free or discounted admissions or parking or preferred access to goods or services, or
• Admission to events that are open only to members and the cost per person of which is within the limits for low-cost articles described in Revenue Procedures 90-12 and 92-49 (as adjusted for inflation). Also see the discussion of insubstantial value above.

Only your counsel knows for sure, but calling out the right to purchase tickets for athletic events as an exception seems to infer that the right to purchase tickets for other events is not an exception (again, subject to the $75 threshold).

My understanding is that the 80/20 rule applied only to the right to purchase seating at home athletic contests. 

Back when the 80/20 rule was in force, we periodically discussed that, to evaluate the fair market value of the right to purchase other sorts of seating, we were back in the territory of having to come up with a good-faith assessment of the value of such rights (as challenging as that might be).  The 80/20 rule just applied a special rule for determining the fair market value in that one case, the right to purchase tickets for seating at home athletic event, and it set the value of the benefit at 20% of the amount of the associated contribution.

When the deductibility of the right to purchase seating at home athletic contests under the 80/20 rule was eliminated, the language was just that the deductibility under that section was eliminated, specifically.  Again, there is no impact on any other types of rights to purchase seating not described in that section.

Here's the language:

(l) Treatment of certain amounts paid to or for the benefit of institutions of higher education

(1) In general

No deduction shall be allowed under this section for any amount described in paragraph (2).

(2) Amount described

For purposes of paragraph (1), an amount is described in this paragraph if-

(A) the amount is paid by the taxpayer to or for the benefit of an educational organization-

(i) which is described in subsection (b)(1)(A)(ii), and

(ii) which is an institution of higher education (as defined in section 3304(f)), and

(B) the taxpayer receives (directly or indirectly) as a result of paying such amount the right to purchase tickets for seating at an athletic event in an athletic stadium of such institution.

If any portion of a payment is for the purchase of such tickets, such portion and the remaining portion (if any) of such payment shall be treated as separate amounts for purposes of this subsection.

My US$0.02 worth; the usual disclaimers apply.