FMV (Fair Market Value) FAQS

Common questions about determining and reporting FMV of items and transactions.

Note:  potential tax deductions are only available for charitable contributions made to organizations with a qualified non-profit status.

Q:  Why must I declare a FMV?   How is it used?

A:   FMV is a critical (and thus required) data point because it is used:

  • by the Donor (provides a dollar value for their charitable contribution)
  • by the software as the basis for determining the minimum bid and raise amounts (default values) for silent items.
  • by Bidders to gauge the true value of an item when placing bids
  • by the Buyer (provides the documentation needed to claim a charitable contribution if price paid exceeds FMV)

 

Q:  What if we don't know, or don't trust the accuracy of a FMV?

A:   Fair Market Values of a donated item or service is generally provided by the Donor.  If the Donor is uncertain, provide a prompt, "the FMV provides the documentation you'll need to claim your tax deduction - what should that number be?     Your organization doesn't need to independently verify the FMV provided, but it is still a good idea to include a disclaimer in the Fine Print section of your receipt:   "Fair Market Values are estimates only.  Please consult a tax professional. . ."

Tip:  since FMV is a required field, you must enter a value in order to proceed.   In the absence of a declared FMV, use an easily recognizable placeholder (such as $999) rather than $0.   If uncorrected, the $999 placeholder will at least prevent the buyer from claiming an ineligible deduction thus creating problems for the buyer (and your organization) if audited.

Q:  Why doesn't the FMV field display for Paddle Raise or Raffle items?

A:  The price fields that display for each Item Type reflect how an item is sold (fixed price, competitive bid etc) and whether or not the sale (or a portion of the sale) may qualify as a charitable contribution.

Paddle Raises are used exclusively to record cash donations so FMV field doesn't display because the FMV is always = $0

Raffle Tickets are games of chance and are never tax deductible so the FMV field is automatically populated (behind the scenes) to match the price

Note:  Paddle Raise and Raffle item types cannot be offered online.   If you have a specific need to sell these items online (and it is legal to do so in your jurisdiction), you can create items with type = Sellable and FMV = $0 (paddle raise) or FMV = Price (raffle tickets) to serve the same purpose online.

Q:  What's the best way to handle FMV for items with high emotional, but low market value?

A:  A common approach to the tricky question of what to list as Fair Market Value (FMV) on items where someone is hosting a party, outing, activity and/or classroom projects is to base the FMV on the cost of food/materials/venue costs etc.  This will provide documentation so the item donors can claim a charitable contribution for their out-ofpocket expenses and buyers can claim the difference between what they paid and the FMV.

These items are often displayed with a FMV of  "Priceless!"  to reflect that the true value of the item is intangible.    You must still provide a valid FMV for items displaying as Priceless! in order to provide credit to the donor/host/organizer for their expenses and to the buyer for their charitable contribution (amount paid in excess of FMV)

Q:  I edited an item and removed the FMV and now the the FMV appears as N/A.  Is this okay?

A:  While FMV is a required field for new items, the software will allow you to remove the value in an edit.   Be aware that when items with FMV = N/A are sold, the FMV will be updated to equal the sales price, preventing the reporting of any potential tax deduction.    Because FMV = N/A will provide no value to the Donor and no value to the Buyer, the use case for it is very narrow - and it should only be used when you have such a unique case.

Q:  What should I list as the FMV for (admission) Tickets?

A:  FMV for tickets is generally considered to be the cost of the food, drinks, and any "goodies" that are included in the ticket price.  For example, a ticket costs $100 and includes dinner ($25), two drinks ($12) and a commemorative pin ($4) so the FMV = $41 pp.   Most users only provide an actual FMV if there is a significant difference between ticket price and the actual FMV.  If they are close, it is easier to simply make FMV = Price.

Q:   I don't want the FMV to display. . .

A:  FMV is displayed in numerous places, and all have settings to control the display:

Q:   Can I list FMV = $0 on items so the buyer can claim the entire amount as a charitable contribution?

A:   Yes - as long as the buyer is not receiving anything of "market value" for their expenditure.  And yes - there is plenty of gray area in that answer.  We are not tax experts and can only advise the acid test:  "If I (or the buyer) were audited, would the IRS agree that no "consideration" was received in exchange for this "charitable contribution"?

Here are some common examples that won't pass the 'acid test":

  • Sponsorships that provide complimentary tickets and/or printed ad space.
  • Items that have a clear market value (eg tickets to sporting events, artistic/musical performances, retail items)
  • Admission tickets that include meals or tokens/tickets for games of chance)
  • "Privilege" items (eg front row seats or reserved parking) IF there is a cost associated with regular tickets or parking (FMV = regular cost)

And some common examples that are likely to pass:

  • Principal for a day or other "experiences" which include no tangible "takeaways" (such as lunch)
  • Sponsor a teacher/student/scholarship
  • Buying/contributing toward "wishlist" items
  • Temporary Privileges (such as dress code exemptions, front row seats to otherwise free events with first come/first served seating, "go to the head of the line" etc)