An ExampleA corporation donates 10,000 books which cost $5.00 to manufacture and sells for $15.00. Cost to manufacture $5.00 + $5.00 (1/2 the difference between the cost and FMV)=$10.00x10,000 books=$100,000 The donation would earn the corporation a $100,000 tax deduction. |
Donations to Michigan Friends of Education Provide:
- IRS special tax incentive rule known as section 170 (c)(3) allows
manufacturers and distributors to make donations of equipment and
other inventory to nonprofit tax-exempt 501 (c)(3) organizations at
a considerable tax advantage.
- The property donated must be new or reconditioned as new.
- Gifts can usually be deducted at cost plus one-half the difference between the cost (basis) and the fair market value (FMV) not to exceed twice the basis of the property.
NOTE: The maximum tax donation is double the cost of materials donated. In the example above, if a book sells in excess of $15.00, the maximum donation would still be $10.00 per book. Deductions are limited to 10% of the taxable income each year.
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