Saturday, June 16, 2012
Wall Street Journal: Lunch With Warren Buffett: One Giant Tax Deduction, by Laura Saunders:
Is the donation tax-deductible? Experts say most of it probably is, meaning taxpayers in effect will pick up about $1.2 million of the tab. ...
Like any other charity, Glide will have to send the donor a letter saying how much of the gift is tax-deductible, and the assessment must be able to withstand a challenge by the IRS. Last month, the U.S. Tax Court, in a case known as Mohamed v. Commissioner, denied an $18.5 million charitable deduction by a California couple who didn't have correct paperwork before they filed their return.
Experts expect Glide's letter to exclude the fair-market value of the lunch from the donation total. The law mandates a disallowance for any goods or services received in connection with the donation, such as the lunch, which includes Mr. Buffett, the donor and up to six invited guests. The fair-market value is the cost of the prepared food to regular diners, not the purchase price of the groceries at a market.
What is Mr. Buffett's company and conversation worth? Nothing, under an IRS rule in effect since the mid-1990s. It deems "celebrity presence"—as when a famous artist gives a museum tour to a donor who has won it in a charity auction—to have no value in and of itself. Mr. Buffett has specified that talk of investments is off limits, so he isn't providing a service.
Update: Forbes, Should Warren Buffett's $3.46M Lunch Be Tax Deductible?