Professional services in return for charitable donation. Business expense?

If there was a legitimate business purpose it could be. But I don't understand what that legitimate purpose could be without more information.

The business purpose is to get professional review and edit/revision suggestions for a manuscript in progress. The usual alternative would be to pay a professional editor directly for that. A writer would do this to help get a manuscript into shape before querying to potential agents or self-publishing it.

Time/labor can't be deducted as a charitable donation. Say I am in a field that values my time at $50/hr. I donate 10 hours (of that labor/talent) to a charity. The best I can get is the minimal mileage deduction, but not my wages.

The above scenario is actually more convoluted. "Donate to a charity and I will do X for you." The recipient is actually receiving something of value (e.g. the coffee mug from public radio) which actually drops the potential value of their own deduction. Above, the charity isn't gaining anything and the original donor potentially loses out on some of his deduction. The publishing house gets no deduction at all.

But that's completely irrelevant. Taxpayer gave cash to the Red Cross. The question is about taxpayer's taxes, not the editor's.

It seems to me that as presented, it's plausibly a business expense, but it also seems to me that listing a donation to the Red Cross as a Sched C expense is painting a target on your forehead.

R's, John

I agree that it looks like a legitimate business expense. I wouldn't call it a donation to the Red Cross, but a payment for services.

To be 100% clear, the question is if the *writer* can take the $X as a "professional services" business expense on their Sched C.

The whole thing is interesting. The writer is getting something of value in return for the donation, but that something of value is *not* coming from the charity. At some level the writer is basically buying services from a provider, with the payment for services being a charitable donation to a 3rd-party charity.

If it is a business expense, it is not a donation.

Or if the donation exceeds the value of the business expense, it is part business expense and part donation.

Isn't the more interesting question whether the service provide must consider this income, and take the charitable deduction?

But the services aren't coming from the same party that received the payment.

Could it be considered a gift from the publishing house, which they give to people they consider worthy (because they made the donation)?

Suppose a stranger sees you put $10 into a Salvation Army bucket, walks up to you and says "That was a very nice thing you did, here's $5 to defray your costs." Do you only get to deduct $5?

Is the difference that you know when making the donation in the original post that you can get something in return? What if you only find out about it after making the donation?

Here's another hypothetical. You donate to a public radio station, and ask them NOT to send you the tote bag. But they send it to you anyway. Do you have to reduce your deduction by the value of the tote bag? BTW, does anyone really do that for such minimal compensation?

I disagree. This is a charitable contribution (Schedule A) and nothing else. If this transaction were to be audited, the IRS would say.. "show the receipt to document this expense." The receipt would need to show the nature of the goods/services purchased. The Red Cross receipt would show nothing business related.

Taking things to extremes, the services received from the publisher could be construed as income, though I doubt the IRS would press that issue. ("Gross income [is] all income from whatever source derived..." 26 USC 61).

Ira Smilovitz, EA

I misread who the player's are. Thanks for setting me straight.

What income did the service provider receive? He's providing services gratis.

And as someone else pointed out, you can't take a deduction for the value of services provided. And even if you could, he's not providing those services to the charity, but to someone who donated to the charity.

This is a step transaction on the part of the service provider. Trying to get around some limitation on his charitable deduction.

And just because a charity's receipt fails to disclose that something of value was received does not negate the fact that something of value was in fact received. It is the responsibility of the tax payer to fully disclose and fully comply. Just like when someone doesn't give you a

So what? That kind of thing happens all the time. If a collection agency comes after you for a debt and you pay them on behalf of your creditor, it's just as much a valid expense as if you paid the creditor directly.

The difference is that you spend money with the intent to get "ordinary and necessary" consideration back in exchange.

If the IRS can use the step-transaction doctrine, why not the taxpayer?

He doesn't have to personally receive services - it's valid consideration for those services to go to someone else.

See this article, specifically re "constructive receipt".

It's an interesting article, but deals with a very specific situation and has nothing to do with OP's question.

I agree completely with Ira S. This is nothing more than a charitable contribution deductible on Schedule A. The fact that a third party is providing an incentive to people to donate to the charity has no bearing on the facts. The only issue, is whether the donor received something from a third-party that is taxable. I think not. The third party is making gifts out of the goodness of his/her heart asking for nothing in return. Gifts are not taxable.