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Nonprofit Math: Determining Fair Market Value



What is fair market value and what does it mean to me and my organization?


That is a question I often hear from fundraisers who manage special events.


Let’s start with a math exercise for a fundraising event.


Example:

  • Ticket price = $150

  • Number of guests you are guaranteeing to the venue/caterer = 100

  • Cost of venue rental and catering = $10,000

  • FMV per person: $10,000/100 = $100

  • The good faith estimate of the Fair Market Value of goods and services the donor receives in return for their $150 ticket is $100. The remaining $50 is the amount that may be eligible for a tax deduction to the fullest extent of the law. Most donor relationship-management databases will have a mechanism to track the FMV for each ticket purchased.


Ethical practice per AFP:

Include on all solicitations, tickets, and receipts for special events a statement as to the fair market value (or good faith estimate) of services or goods to be received by the donor in exchange for a contribution.


Fair market value language:

Receipts for all donations received by your organization should include a statement similar to the one below:


Donations and amounts paid over FMV for goods and/or services listed on this receipt may be tax deductible. Consult your tax advisor to determine your deduction eligibility. This organization provides no tax advice.


Fair Market Value should be addressed in your gift acceptance policy. This is not just about luncheon tickets, it’s also about asset based donations such as stocks, real estate, art, and possibly even a share in a business. The basic rule of thumb for Fair Market Value for tangible items such as these is, what is the value of the item when the nonprofit takes possession of it? It is the donor’s responsibility to correctly file their taxes, but they will depend on you and your organization to give them an accurate receipt. Click HERE for IRS guidelines.



Cheers


Michelle Crim, CFRE


Dynamic Development Strategies can help. We offer coaching, grant writing, and fundraising services for our nonprofit clients. We specialize in small to mid-size organizations because we understand your challenges. Please contact us for more information.


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