UCSD Development Training
April 30, 2010
Agenda
Auctions
 Definition
 Auction “Rules”
 IRS filing requirements
 Conducting Auctions
Agenda, cont:
Gifts-in-Kind
 Definition
 Process to Accept
 Valuing Gifts-in-Kind
 Other Considerations
 Resources
Auctions
Definition - Auctions
 An auction is an event in which goods or
property are sold to the highest bidder
 Charity auctions are a method of bringing in
private support, and are typically held at our
events
Auction Rules
 There are many IRS rules and general “dos”
and “don’ts” we must be aware of to ensure
compliance with those regulations, while
protecting the possibility of providing a taxdeductible opportunity for many of our
event patrons
.
Auction Rules, cont.
Items contributed for an auction may be taxdeductible
 There are two underlying rules:
1) The item must be a gift in the eyes of the IRS. This
excludes material recognized as either a service or
partial interest
Examples of non-deductible services include: free massages, legal
advice, tax preparation, etc.
Partial interest gifts include the use of a vacation home, free rounds
of golf, free airline tickets, or stays at a hotel
Auction Rules, cont.
2) The item must actually sell at the auction.
Therefore, we do not provide receipts for donated
items until after the conclusion of the auction. Those
receipts will describe, without indicating value, what
was given
Auction Rules, cont.
More IRS rules !

Donated auction items fall under the IRS definition
for unrelated use property. Any contributed property
not put into service by the nonprofit organization falls
under this category. (A related use gift would be a piece
of medical equipment donated to our School of
Medicine to be put into service by the School of
Medicine.)
Why does this matter ?
Auctions Rules, cont.
Answer: Because the law requires a reduction in a
donor’s deduction for unrelated use property. We
should advise donors when soliciting auction
items of the unrelated use aspect of their donation
IRS Filing Requirements
The value of the items contributed may call for
different actions
 Donors who give items valued over $500 may need to file IRS Form
8283 with their tax return. They should be encouraged to seek tax
guidance and, if required, obtain a copy of the latest version of this
form, complete their required portion, and deliver to the Gift
Processing Office for signature and return
 Donors who give items valued $5,000 or more should be advised of
their possible requirement to obtain the signature of a qualified
appraiser on their 8283 prior to delivery of the 8283 to UC San Diego
for signature. We should also inform the donor of our further
requirement to file Form 8282 with the IRS whenever we sell donated
property of this level within three years of the donation, as will likely
occur for donated auction items
Conducting Auctions
Important ! Prepare an auction program or descriptions
on the bid sheets for viewing before an auction
Why ? Bidders must readily know the fair market value
(FMV) of each auction item. If the winner knows the FMV
in advance of the auction, they will be able to claim a
charitable deduction ( a gift) for any amount paid in excess
of that FMV

Also, donors should be advised that any amount paid for
the item up to its fair market value is not considered by the
IRS as a tax deductible charitable donation

Conducting Auctions, cont.
Obtaining FMV of items
 You can obtain the estimated FMV from the donors. Either ask the
donor to complete a Deed of Gift form or Donor Auction Form or have
a dept. staff do so. Deed of gift and Donor auction forms can be found
on the Gift Processing website
 Remember - there can be no listing of an item as “priceless,” unless
there is no desire or intent to provide the winning bidder with a
possible tax-deduction. In such a case, the winning bid establishes the
fair market value and, thus, the bidder receives equal value for their
payment (in other words- no gift !!!)
 Please make all efforts to identify the FMV of auction items. Prior
similar auctions and eBay are good sources for values
Conducting Auctions, cont.
 In order for Gift Processing to properly determine whether
the donor of the auction item has made a deductible giftin-kind AND whether the purchaser of the item has a
portion of their gift that is tax-deductible , Gift Processing
must receive one list of all auctions items with the name of
the donor, item description, declared FMV, and name of
the purchaser and what it the item “sold”
- An alternative to a “list” is to complete “Auction
Purchase forms” (on Gift Processing website) for each item
purchased
 If no records are kept of the auction, we will not be able to
receipt the donor and we will have to assume the purchaser
paid FMV and thus have no gift portion of their gift
Conducting Auctions, cont.
 Suggested Disclosure to Auction Bidders
- on bid sheets or in auction book
“To our Bidders,
We appreciate your support of UC San Diego’s (dept name). All
proceeds from the sale of items in our auction benefit (dept. or
purpose).
It is important we follow IRS guidelines. Therefore we want to
ensure you are aware that the amount of your purchase price that
exceeds the stated Fair Market Value of the item (disclosed on the bid
sheets) is a tax deductible gift. Any amount paid up to the FMV is
considered an equal exchange and therefore is not a tax-deductible gift.
Your receipt will indicate each of these amounts.”
Conducting Auctions, cont.
 Lack of proper records of auction items can also
cause reporting issues for the UC San Diego
Foundation as auction items are subject to sales
tax
 If your division or department wants to hold an
auction and has not done so in the past….
Contact Gift Processing ! We can help
Definition – Gifts-in-Kind

Gifts of assets that are non-monetary in nature and
are either
1) to be kept and retained by the UC San Diego
2) to be sold and/or disposed of
3) to be used in fundraising or for incentives

Examples of Gift-in-Kind contributions
- Tangible personal property (e.g. equipment, fine art)
- Intangible personal property (e.g. patents,
copyrights, software licenses)
- Real Estate

Contributed Services are NOT considered a Gift-inKind (e.g. professional design, engineering, construction
services) Only out-of-pocket costs related to providing these
gifts may be deducted by the donor
Process to accept Gifts-in-Kind
 If a Gift–in-Kind is tangible property need to
determine
- Is it readily marketable (can be sold) or
- Is it needed by the University (will be used
internally)
 Gifts to be sold such as fine art, real property and other
appreciated assets are subject to a detailed due
diligence process
- Direct to the UC San Diego Foundation
- Depending upon review, Gift may or may not be
accepted
Process to accept Gifts-in-Kind, cont.
 Gifts-in-Kind to be retained by UC San Diego
generally processed through The Regents
 For Equipment gifts:
- Need a department owner
- Are documented using a gift letter or deed of gift form
- For used for equipment – we need to ensure it is safe, nd
we often ask for help to determine the value
- If agreement contains indemnity language (e.g.
disclaimer of all warranties”, “title and risk of loss” and
“indemnification”) expanded due diligence will be
required and clearance obtained from UC San Diego’s
Environment, Health and Safety Office
Process to accept Gifts-in-Kind, cont.
 Other considerations in accepting a gift offer ?
- Potential ethical issues
- Major uncertainty about existence of value
- If any financial, promotional or other
consideration is paid or given to donor- it is not a
Gift-in- Kind
- If gift is property, may not accept if it can’t be used
internally or sold quickly
Valuing Gifts-in-Kind
 Gifts-in-Kind are recorded at their Fair Market Value
 Under certain circumstances value will be assigned by
appropriate department official
 For equipment and software, value may be recorded using
the Educational Discount (i.e. what the price the UC San
Diego would be paid for the property if purchased)
 Gifts-in-kind are receipted with a description of the gift
only -- “value as declared by donor” is listed as the amount
 Donors are responsible for determining the deducted
amount on their tax returns
Valuing Gifts-in-Kind, cont.
 The IRS and UC San Diego require that Gifts-in-Kind
with a value of $5,000 or higher have an independent
appraisal provided by the donor
 If the gift is valued at $5,000 or more and is
produced/manufactured by the entity making the
contribution
- An itemized inventory list, invoice or letter from
vendor donor or published info on value of the
items is required
Valuing Gifts-in-Kind, cont.
 What are Standards for Appraisals?
- Independent appraisers
- UC San Diego will not pay for appraisals of
contributed assets
- Must comply with IRS Guidelines
- Must be no earlier than 60 days prior to date of the
gift
- If appraisal lists a range of values, will record
value as mid-point
Other considerations
 Intellectual property gifts are particularly
cumbersome – and rare now. Contact us
 Real estate gifts require a great deal of due
diligence and are handled as a planned gift
 Each Gift-in-Kind can be different – we
recommend you contact Gift Processing when you
become aware that we have received a Gift-InKind or that a donor is considering giving a GiftIn-Kind
Resources
 CASE Reporting Standards & Management Guidelines
- Can be purchased at:
http://www.case.org/Publications_and_Products/CASE_Store/CASE_R
eporting_Standards_and_Management_Guidelines_for_Educational_F
undraising.html
 The following forms and resources can be found on the
Gift Processing website: http://wwwer.ucsd.edu/giftprocessing/
- Deed of Gift form
- Donor Auction Form
- Auction Purchase Form
- UCSD Gift Processing Manual
Questions?