Silent Auction Basics
The law limits a donor's charitable deduction to the donor's tax basis in the contributed property (i.e., the
cost paid by the donor to originally buy the item) and does not permit the donor to claim a fair market value
charitable deduction for the item donated for auction. Specifically, the Treasury Regulations under section
170 provide that if a donor contributes tangible personal property to a charity that is put to an "unrelated
use", the donor's contribution is limited to the donor's tax basis in the contributed property. The term
"unrelated use" means a use that is unrelated to the charity's exempt purposes or function, or, in the case of
a governmental unit, a use of the contributed property for other than exclusively public purposes. The sale
of an item is considered unrelated, even if the sale raises money for the charity to use in its programs.
Donors of "goods" receive a tax receipt from UVM that includes a description of the item donated (there is
no value placed by UVM on the tax receipt): "Thank you for your gift of a television for our silent auction."
"Services" are generally not tax-deductible (accountant giving 3 hours of free time to highest bidder). We still
issue a receipt to the donor that includes the description and the donor needs to consult with his/her tax
adviser to determine deductibility.
Donors who purchase items at a charity auction may claim a charitable contribution deduction for the excess
of the purchase price paid for an item over its fair market value. The donor must be able to show, however,
that he or she knew that the value of the item was less than the amount paid. For example, a charity may
publish a catalog, given to each person who attends an auction, providing a good faith estimate of items that
will be available for bidding. Assuming the donor has no reason to doubt the accuracy of the published
estimate, if he or she pays more than the published value, the difference between the amount paid and the
published value may c