Monday, November 24, 2008

POP


Important Edit:  I totally messed up and made this sound like there was only one person, one friend that I'd talked to who mentioned this idea.  Actually, after I had heard it from 3 multi-sport friends, I thought I'd dig in deeper.  I'm by far NOT the expert on this, and I welcome some opposing thoughts and ideas.  To my good friend, you know who you are, I'm very sorry for my one-sided post.

I hate to burst your bubble. I really do. There are folks out there that have and are planning to enter an Ironman event through a Community Slot and then write off all of their travel and training expenses, as well as the entry fee, as a charitable donation. Sounds good on the surface, and their CPA says it's perfectly ok.

Of course they do. And of course, the IRS audit is all on you.

Other than actual cash or non-cash donations given directly to a qualified charitable organization, like the NAS Community Fund, a registered 503 (c) charitable organization, it is possible to also deduct unreimbursed Out of Pocket Expenses. It is stipulated in IRS Publication 526, however, howthese expenses must be incurred: "you may be able to deduct some amounts you pay in giving services to a qualified organization". It is in that stipulation that I have a hard time wrapping my mind around.

What service to any organization is served in competing in an Ironman? The list of recipients of Community Funds is long and genuine, but no physical 'serving' is accomplished in the 17hrs or less of Ironman toil. When you donate money to church, for example, do you write off your job expenses because you were using that job to raise the money you donated? No, and you couldn't if you wanted to. Could you write off expenses you incurred while volunteering at a church function? To some degree, yes. The service must be directly related to the charitable contribution, not as a result of it.

Put it this way: your church service example is such that your actions while volunteering directly contribute to the raising of money for the charitable organization. Your actions at Ironman are a byproduct of your initial charitable contribution. If you contributed and didn't race, the charity would not suffer in the least.

Perhaps it is a subtle distinction, and I'm sure someone with more accounting and tax experience than I, like a CPA, could argue for the deductions. I'd be curious to see how the deductions held up to the scrutiny of an IRS agent, however.

One of the interesting documentation requirements of the deduction is that in addition to keeping the appropriate record of the expenses, the taxpayer MUST also obtain acknowledgement from the charitable organization that contains:
  • a description of the service you provided
  • a statement of anything you received as reimbursement (if any) for your expenses
  • a valuation of any goods or services you received
  • a statement that only intangible benefits were received.

Good luck getting that statement before filing your taxes. Oh yea, and try and put a value on the benefits of Community Slot entry - the fleece, the visor and backpack. Oh, and entry into an otherwise sold-out event. So what is the value of entry to an event otherwise unable to enter? Does that move into the realm of "Tangible benefit" vs. intangible? Good question.

The $775 donation is, of course, charitable and deductible (of course, only if you use a Schedule A - do you have a mortgage? If not, then you probably don't itemize your deductions, and therefor, disregard this whole post - you can't deduct your charitable donations period). Please, someone, shed some light on how the expenses can also be deductible!

Sorry, btw, for the boring tax-related post.

Edit: I don't know how often this has happened in the past, but I was inspired to write this when a friend said his CPA had already said it was ok. I looked at the IRS Pub that covers this part of Tax law, and of course it was clear as mud. Getting the documentation, for those out there that are still going by what their CPA "who has done taxes for years" says is ok, will be the kicker - as is the general argument that the act of racing is not a service to a charity. Perhaps something like the MS ride series - where you personally solicit donations and those are based on your completion of the event - could be a valid example of training and travel expenses that are deductible. I doubt the IRS Agent completing your audit will be so impressed with your IRONMAN finisher's medal that he or she will overlook your $5k in Charitable Iron Expenses.

Wake UP!

21 comments:

kt said...

huh? :)

Spokane Al said...

As I understand it, when one purchases a ticket to an event, be it a concert or a dinner or an IM, the extent of the deduction is the amount paid over the normal amount for the ticket. I.E. if you buy a $20 concert ticket for $50 as a part of a charity, you can deduct the $30. That is the extent of the deduction.

But then again I am not a tax expert, but I did stay at a Quality Inn.

Visionbuilder said...

ZZZZZZzzzzzzzzz

Danielle in Iowa said...

Is this a common occurrence?

Jamie said...

My brain hurts.

ShirleyPerly said...

Ha, I just thought that the $775 donation (whether or not deductible) was a cheaper alternative for some folks than taking time from work and the travel expenses to be onsite to register for next year's race.

JohnnyTri said...

You go big stud on those TAX laws!!

rockon`

Paulie said...

After hearing TacBoy claim that that all this stuff was deductible on your podcast I did some quick internet research and quickly determined that it is not deductible. The only deduction you can take is the charitable portion of the entry fee (i.e. the portion of the entry over an above the regular entry fee, minus any benefits recieved such as swag, etc.), and to take the deduction you need a letter from the race organization stating how much you can deduct.

21stCenturyMom said...

and what if you raise the $750 from other people? Since they contributed specificially because you were racing do you get to deduct your travel and your entry fee? You certainly DON'T get to deduct the money you raised - the people who gave it get to deduct it.

Seems to me that if you pay the entry and you pay the community slot funds ($750 of your own money) then you get to deduct $750 because that is a donation to a charitable group. Other than that I would think you are SOL and cannot deduct travel or lodging expenses.

So Marc - how will you check this out?

Shawn said...

I'm make it easy on everyone - just donate the $750 to my Team in Training fund raising site. Tax deductible, no questions asked! ;)

I really did wonder if some of my training time and/or other expenses were deductible since I am actually DOING the Tri for donations.

Comm's said...

The money you spend at Janus for the IM slot should I think be totally tax free. Its the charities tax ID that matters in this case and their status, not what the contributor receives back.

Why would some idiot try to deduct their swag purchases or travel costs on a community slot? That's poor tax advice.

Unless the person can claim some sort of business related expense or gift status on swag (both hard cases to make to the IRS)a person is better off not going that far over the line.

excel man said...

Taxes? Taxes? Dude, take off that green eye shade and strap on you bike helmet and go train! ;^)

I pulled the trigger on St Anthony's registration this morning.

Enjoyed your company on Thanksgiving.

excel man said...

I just received the following interrogative from GEL regarding the price of SA registration: $230 @#$%^&*! ;^)

excel man said...

Your first 2 century rides might fit into my sched. The last one is too close the SA. The 1/2 Iron in Sarasota is too close to SA but I might do the Aqua Bike version (no run).

Cody the Clydesdale said...

Hey! Never thought of getting a tax deduction from a community slot. Great idea!
Oh, I'll choose to ignore the wake up part of the argument. I'm content to
smile, sign up, & race while getting a tax deduction;)

Green Eyed Lady (aka GEL) said...

It wasn't boring at all - spoken like a true accountant! LOL. Qualified tax deductions, when purchasing tickets, will state the amount deductible, if one exists. Some people even think Girl Scout cookies are tax deductible for crying out loud. They are not even though a portion is used by the council after the cookies are paid for. The only way they are deductible is if they are donated. Shawn has the right idea! TNT rocks...a former alumni

IronJenny said...

I like Shirley's explanation.
Hey are you still in for MN B2B? Do you have a team name you'd like to use or can we be Puke-and-Rally?
;-)

CoachLiz said...

Bigun,

I think you are right on this one. I have a deep seated belief that if you sign up for an event that is a charity event or a charity slot then you should go out and raise money to donate to that charity. Yes in the past I have donated my own money to a charity slot when all of the money did not come in to reach my goal and if it was over $50 I claimed that as a donation. I have not claimed an entry fee, equipment to do the event, travel expenses, or expenses that racked up during training for the event. To me that just seems like asking for trouble.

Yes, give your money to Greyhound to ride the MS-150 in honor of his wife who has MS or contribute to someone who is doing a TEAM IN TRAINING event.

CoachLiz said...

Bigun,

I think you are right on this one. I have a deep seated belief that if you sign up for an event that is a charity event or a charity slot then you should go out and raise money to donate to that charity. Yes in the past I have donated my own money to a charity slot when all of the money did not come in to reach my goal and if it was over $50 I claimed that as a donation. I have not claimed an entry fee, equipment to do the event, travel expenses, or expenses that racked up during training for the event. To me that just seems like asking for trouble.

Yes, give your money to Greyhound to ride the MS-150 in honor of his wife who has MS or contribute to someone who is doing a TEAM IN TRAINING event.

Missy said...

I swear to God I know an accountant that 'let's' someone write off running shoes and entry fees for all kinds of events...self employed and it's considered part of the 'marketing package.' Yep, believe it.

Fe-lady said...

Things are OUT OF CONTROL when it comes to IM events especially...
kinda leaves a sour taste in my mouth at times, but I still love the sport and most of the people in it....