Friday, April 25, 2008
Following up on this morning's post on whether the buyer of David Ortiz's Red Sox jersey buried in the concrete of the new Yankee Stadium by a construction worker can claim $174,385 of the $175,100 paid for the jersey at an eBay auction as a charitable deduction: Bryan Camp (Texas Tech) offers his thoughts:
Hi all, great exam question which can test 2 doctrines, the “to or for the use of” language in § 170(c), and the fmv issue that Paul identifies in his post. Both are cool issues.
The first issue turns, I think, on the identity of the seller. If the seller is a § 501(c)(3) org, then the payment of cash is “to” a charity. From the AP account, that is what actually happened. The Yankees donated the jersey to the Jimmy Fund, presumably a qualified charity and it was the Jimmy Fund that sold the jersey.
But you can have fun with the facts, I think, if you posit that the seller was NOT a § 501(c)(3) org. So say it was actually the Yankees that sold the jersey. Then, to take the charitable deduction, the buyer has to make some argument that the payment is being made in trust or some similar arrangement, Davis v. United States, 495 U.S. 472, 483 (1990) (donation is “for the use” of when it is made to a trust or trust-like entity which is obliged to disburse the funds to or on behalf of qualified charitable organizations who “must have significant legal rights with respect to the disposition of donated funds”). So the Jimmy Fund must have had some significant LEGAL rights to the sale proceeds, otherwise it would just be the Yankee’s donation. You need some binding arrangement that give the Jimmy Fund significant legal rights to the sale proceeds. Dealing with this first issue is a matter of good planning. So this might be a good fact pattern to test that part of § 170.
The second issue, of course, is the one Paul id’s in his post. I would raise it by asking students whether both the buyer AND the Yankees get a charitable deduction and, if so, for how much? Again, this could be a matter of planning. If the Jimmy Fund had purchased the jersey from the Yankees for $715, then you would now at least have a market transaction that you could argue established a fmv for the jersey. But it seems to me that the buyer is in a much more difficult position to assert the $175k as a donation.
Of course, there seems to always be a baseball exception to every tax rule --- witness the record-setting home run baseball issue and, of course, Artnell.