I was just thinking … tax deduction for a charitable donation by winning a Bass lot?

retirednow

Thinking about the several recent The Harry W. Bass, Jr. Core Collection Auctions held by Heritage, where the proceeds of the sale are going to the Harry Bass Foundation - A none profit, If one secured a winning bid - could one demonstrate a portion of the hammer price as being a charitable donation if one could show it being above market price? I believe there were many record prices set.

To be clear , I am not seeking or wish to use this posting as tax or financial advice, and those that won those mega pieces do not see advice from a blog … but I am just curious.

On the IRS Web site under one of the topics … “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. … “

I am sure this reopens up the same old can of worms about defining fair market values for rare coins …

I was just thinking.

jmlanzaf

In theory you could, but good luck proving that

NJCoin

@jmlanzaf said:
In theory you could, but good luck proving that

Yeah. Not for these. That's where you're bidding $1,000 at a charity auction for $100 worth of tickets to a sporting event, or something like that, where the items are donated by people in order to incentivize the charitable contributions by the bidders. The donor deducts the $100, and the bidder deducts the $900 excess over the value received.

The Bass auction was not a charity auction. The Bass family will be taking the deduction for the net proceeds, with Heritage deducting the juice if they are not keeping it. The winning bidders established market value, and there was no intent at that auction for the bidders to do anything other than add the lots to their collections. The Bass family and Heritage are making the contribution, not the bidders.

lermish

@NJCoin said:

@jmlanzaf said:
In theory you could, but good luck proving that

The Bass auction was not a charity auction. The Bass family will be taking the deduction for the net proceeds,

Weren't these already held in the Bass foundation? So the deduction would have been made when the coins were donated to the foundation. There should not be any further deductions.

daltex

This is a good time to talk to your tax professional. At least before you try it on your return.

MrEureka

You might have a chance if you jumped a bid to 10 times its actual value, but you might also have to sell it before you see a tax benefit.

NJCoin

@lermish said:

@NJCoin said:

@jmlanzaf said:
In theory you could, but good luck proving that

The Bass auction was not a charity auction. The Bass family will be taking the deduction for the net proceeds,

Weren't these already held in the Bass foundation? So the deduction would have been made when the coins were donated to the foundation. There should not be any further deductions.

Correct, if that's the case. I did not realize that and, if so, that sucks for Bass, since he probably took a smaller deduction when he made the donation than what the coins realized at auction.

NJCoin

@MrEureka said:
You might have a chance if you jumped a bid to 10 times its actual value, but you might have to sell it before you see a tax benefit.

Sure, but that's not what this auction was, which is why it didn't happen. Those things typically happen with items of much more modest value, such as a lunch with a celebrity, than with collectibles worth 5, 6 and 7 figures. Those deductions typically go to the donors, not the bidders.

lermish

@NJCoin said:

@lermish said:

@NJCoin said:

@jmlanzaf said:
In theory you could, but good luck proving that

The Bass auction was not a charity auction. The Bass family will be taking the deduction for the net proceeds,

Weren't these already held in the Bass foundation? So the deduction would have been made when the coins were donated to the foundation. There should not be any further deductions.

Correct, if that's the case. I did not realize that and, if so, that sucks for Bass, since he probably took a smaller deduction when he made the donation than what the coins realized at auction.

I don't think he had any children but both he and his father were dedicated philanthropists in addition to businessmen. His main goal was to have his charitable works continued after his death which they have been and which the sale of the coins was able to further. So I don't think the tax break was really that big of a deal but if he did have kids I'm sure the donation helped lessen any estate tax.

MrEureka

@NJCoin said:

@MrEureka said:
You might have a chance if you jumped a bid to 10 times its actual value, but you might have to sell it before you see a tax benefit.

Sure, but that's not what this auction was, which is why it didn't happen. Those things typically happen with items of much more modest value, such as a lunch with a celebrity, than with collectibles worth 5, 6 and 7 figures. Those deductions typically go to the donors, not the bidders.

Yes, of course, but it's not always like that. Remember the Nobel medal that brought $103.5 million?

https://www.youtube.com/watch?v=-8-p30AxGIc

NJCoin

@MrEureka said:

@NJCoin said:

@MrEureka said:
You might have a chance if you jumped a bid to 10 times its actual value, but you might have to sell it before you see a tax benefit.

Sure, but that's not what this auction was, which is why it didn't happen. Those things typically happen with items of much more modest value, such as a lunch with a celebrity, than with collectibles worth 5, 6 and 7 figures. Those deductions typically go to the donors, not the bidders.

Yes, of course, but it's not always like that. Remember the Nobel medal that brought $103.5 million?

https://www.youtube.com/watch?v=-8-p30AxGIc

No. Was that a charity auction?

NJCoin

@lermish said:

@NJCoin said:

@lermish said:

@NJCoin said:

@jmlanzaf said:
In theory you could, but good luck proving that

The Bass auction was not a charity auction. The Bass family will be taking the deduction for the net proceeds,

Weren't these already held in the Bass foundation? So the deduction would have been made when the coins were donated to the foundation. There should not be any further deductions.

Correct, if that's the case. I did not realize that and, if so, that sucks for Bass, since he probably took a smaller deduction when he made the donation than what the coins realized at auction.

I don't think he had any children but both he and his father were dedicated philanthropists in addition to businessmen. His main goal was to have his charitable works continued after his death which they have been and which the sale of the coins was able to further. So I don't think the tax break was really that big of a deal but if he did have kids I'm sure the donation helped lessen any estate tax.

Don't kid yourself. Tax breaks are a huge deal to everyone, because everyone, no matter how wealthy, would rather direct where their money goes, whether to charity or heirs, than have the government decide for them. If the coins went to the foundation years ago, then more of whatever he left was subject to estate tax than otherwise.

lermish

@NJCoin said:

@lermish said:

@NJCoin said:

@lermish said:

@NJCoin said:

@jmlanzaf said:
In theory you could, but good luck proving that

The Bass auction was not a charity auction. The Bass family will be taking the deduction for the net proceeds,

Weren't these already held in the Bass foundation? So the deduction would have been made when the coins were donated to the foundation. There should not be any further deductions.

Correct, if that's the case. I did not realize that and, if so, that sucks for Bass, since he probably took a smaller deduction when he made the donation than what the coins realized at auction.

I don't think he had any children but both he and his father were dedicated philanthropists in addition to businessmen. His main goal was to have his charitable works continued after his death which they have been and which the sale of the coins was able to further. So I don't think the tax break was really that big of a deal but if he did have kids I'm sure the donation helped lessen any estate tax.

Don't kid yourself. Tax breaks are a huge deal to everyone, because everyone, no matter how wealthy, would rather direct where their money goes, whether to charity or heirs, than have the government decide for them.

Right...but I don't think the amount of this particular tax break was a huge deal. He avoided capital gains on the sale, avoided estate tax on the entire amount, and was able to direct how and where his money was spent. I'm sure he was happy about all of these things. But I don't think there was really any alternative given his goals and (presumed) lack of successors.

MrEureka

@NJCoin said:

@MrEureka said:

@NJCoin said:

@MrEureka said:
You might have a chance if you jumped a bid to 10 times its actual value, but you might have to sell it before you see a tax benefit.

Sure, but that's not what this auction was, which is why it didn't happen. Those things typically happen with items of much more modest value, such as a lunch with a celebrity, than with collectibles worth 5, 6 and 7 figures. Those deductions typically go to the donors, not the bidders.

Yes, of course, but it's not always like that. Remember the Nobel medal that brought $103.5 million?

https://www.youtube.com/watch?v=-8-p30AxGIc

No. Was that a charity auction?

Yes, the proceeds went to charity, just like the Bass sale. But at that price, and especially given the way the bid was jumped, I'll bet that a $100 million tax deduction would be allowed without much of a fight.

Glen2022

Thinking, particularly creative thinking can get one in deep trouble with the IRS.

airplanenut

I think it's already been stated here, but putting on my son of a CPA's hat for a second, this would be a very tough thing to pull off, largely because it would require proving that you paid over market for high-end coins who don't have well-established pricing. If one were to buy a nothing special 1oz gold bar for $10,000 in a sale where the proceeds went to charity, it would be easy to say that it has a market value of around $2000, and you could make a case for writing off $8000 as a donation. But if someone spends $100,000 on a coin where the last one went for $60,000 some number of years ago, it could be really hard to prove the price difference was because the buyer overpaid, rather than the quality of this piece compared to the last one, plus the elapsed time since the last sale, changed the value of the item and $100,000 is actually market price.

jmlanzaf

@NJCoin said:

@lermish said:

@NJCoin said:

@lermish said:

@NJCoin said:

@jmlanzaf said:
In theory you could, but good luck proving that

The Bass auction was not a charity auction. The Bass family will be taking the deduction for the net proceeds,

Weren't these already held in the Bass foundation? So the deduction would have been made when the coins were donated to the foundation. There should not be any further deductions.

Correct, if that's the case. I did not realize that and, if so, that sucks for Bass, since he probably took a smaller deduction when he made the donation than what the coins realized at auction.

I don't think he had any children but both he and his father were dedicated philanthropists in addition to businessmen. His main goal was to have his charitable works continued after his death which they have been and which the sale of the coins was able to further. So I don't think the tax break was really that big of a deal but if he did have kids I'm sure the donation helped lessen any estate tax.

Don't kid yourself. Tax breaks are a huge deal to everyone, because everyone, no matter how wealthy, would rather direct where their money goes, whether to charity or heirs, than have the government decide for them. If the coins went to the foundation years ago, then more of whatever he left was subject to estate tax than otherwise.

Consider the time value of money. A bigger deduction 30 years later is not necessarily better...especially if you're dead and have nothing to deduct from.

NJCoin

@jmlanzaf said:

@NJCoin said:

@lermish said:

@NJCoin said:

@lermish said:

@NJCoin said:

@jmlanzaf said:
In theory you could, but good luck proving that

The Bass auction was not a charity auction. The Bass family will be taking the deduction for the net proceeds,

Weren't these already held in the Bass foundation? So the deduction would have been made when the coins were donated to the foundation. There should not be any further deductions.

Correct, if that's the case. I did not realize that and, if so, that sucks for Bass, since he probably took a smaller deduction when he made the donation than what the coins realized at auction.

I don't think he had any children but both he and his father were dedicated philanthropists in addition to businessmen. His main goal was to have his charitable works continued after his death which they have been and which the sale of the coins was able to further. So I don't think the tax break was really that big of a deal but if he did have kids I'm sure the donation helped lessen any estate tax.

Don't kid yourself. Tax breaks are a huge deal to everyone, because everyone, no matter how wealthy, would rather direct where their money goes, whether to charity or heirs, than have the government decide for them. If the coins went to the foundation years ago, then more of whatever he left was subject to estate tax than otherwise.

Consider the time value of money. A bigger deduction 30 years later is not necessarily better...especially if you're dead and have nothing to deduct from.

True. I just looked it up. I did not realize he died 25 years ago, so this whole discussion is moot, because that's when the coins moved to the foundation. He did exactly what I was saying should be done with respect to holding onto coins until the end. It just so happens the foundation held onto the coins for the past 25 years, and that's fine, since it does not pay taxes as a foundation.

retirednow

@Glen2022 said:
Thinking, particularly creative thinking can get one in deep trouble with the IRS.

Quoting one of our forum members from 4 or 5 years ago ….
“Do you know what they call people who take tax advise from anonymous internet people?

The defendant... “

291fifth

Tax deduction : $1000

Legal fees needed to prove it: $100,000

airplanenut

@291fifth said:
Tax deduction : $1000

Legal fees needed to prove it: $100,000

This is the start of a genius money laundering scheme