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  • From: John Ferree <john AT seldomseenfarm.com>
  • To: Market Farming <market-farming AT lists.ibiblio.org>
  • Subject: Re: [Market-farming] Donating excess produce to Food banks
  • Date: Mon, 18 Jan 2010 13:53:44 -0500

Hope this helps:

http://www.gleaners.org/Give/Ways-to-Give/Corporate-Food-Donations/Retail-Distributor-Manufacture.aspx


Tax benefits for the donor

This will summarize the effect that tax laws have on the treatment, under the Internal Revenue Code, of donations of appreciated ordinary income property* when contributed by corporations to charitable organizations.

This report should be used only as a guide. Donors are advised to consult with a tax advisor in applying the appropriate deduction.

*A common example of ordinary income property is property held primarily by the donor for sale to customers in the ordinary course of business.

I. Allowable Deductions For Charitable Donations of Ordinary Income Property

With two exceptions (the relevant one discussed below), the general rule since 1969 states that a taxpayer who contributes appreciated inventory or certain other ordinary income property is permitted a charitable deduction only for an amount equal to the taxpayer’s basis in the contributed property, not its fair market value.

Congress, in the 1976 Tax Reform Act (Section 2135), further refined the statute to allow corporate donors an increased deduction, under certain circumstances, for contributions of ordinary income property to a public charity or to a private operating foundation. Under I.R.C. Section 170(e)(3), a corporation is entitled to a deduction with respect to a contribution to a public charity or to a private operating foundation of appreciated property described in I.R.C. Section 1221 (1) and (2) (that is, certain types of ordinary income property) in an amount equal to:

A. The sum of one-half the unrealized appreciation (market value minus cost = appreciation) plus the taxpayer’s cost, but

B. Not in excess of twice the cost of the contributed property. I.R.C. Section 170(e)(B).

Example

Selling Price $4.00
Cost $1.00
Gross profit equals $3.00
One half of $3.00 equals $1.50.  

The maximum deduction can never exceed two times cost ($2.00). Therefore, gross profit element is limited to $1.00

Total Charitable Deductions: $2.00

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Seldom Seen Farm
Danville, IN
317.509.7828



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