[PSD tax deduction question]

Submitted by cozy200 on January 15th, 2014 at 4:20 PM

Rookie question. My friend is purchasing season tickets this year from his co worker and is curious if the psd's that are write offs can be put in his (purchasers) name? I have zero experience with this so any help would be appreciated.

Thanks

Mod edit: Changed the title. JGB.

Comments

MLaw06

January 15th, 2014 at 4:28 PM ^

No.  The guy who pays the check to the school for PSDs (the original season ticket holder) will receive a receipt from the school reflecting that the PSD was paid.  Only he can deduct the PSD donation.

If the buyer purchases from the seller (i.e., a secondary market transaction), then that is just the secondary market purchase price (and, to be clear, no portion of such secondary market purchase price could be construed as a donation to the school).

 

dothepose

January 15th, 2014 at 5:07 PM ^

This is strange, I just asked my co-worker this morning if wanted to go in on my tickets. The two guys I usually get tickets with backed out this year...

GRFS11

January 15th, 2014 at 4:36 PM ^

Then why, when I paid for PSDs earlier this week, did it give me the option for someone else besides the ticket holder to pay? I think it might be possible for someone else to pay and get the credit.

highestman

January 15th, 2014 at 5:30 PM ^

It seems in the situation described above, its assumed everything has already been paid to the University by the seller, in which case the charitable deduction is not transferable (if anything, the seller may need to report income for the amount he sold the tickets for....but we won't touch that). If it is the case that there is the option to choose a different person than the ticket holder to pay, then there may be a ways for the OP's buddy to get the tax deduction if the seller has yet to pay the PSD.

highestman

January 15th, 2014 at 9:27 PM ^

Yes thats true, I was paraphrasing in only saying he would pay taxes on the money received because thats not really relavent to the OP, he would be able to deduct his basis.

Proving a business would be pretty much impossible, however, I wonder if you could claim a hobby if you bought and sold enough tickets. In which case, you can deduct expenses up to the amount you earned (with a cap).  So if you did have some net income, maybe you can claim some other expenses to offset that (shipping? I don't know what else there would be, but someone could get creative).

highestman

January 15th, 2014 at 11:18 PM ^

 As a CPA, I would never actualy advocate doing anything remotely similar to what I said. Merely brainstorming semi-crooked schemes for fun. 99.9% of the time you think of a "scheme", it turns out you were just forgetting something simple like you brought up. I also did several years of auditing and now I'm in consulting, but the extent of my personal income tax experience includes an internship in college, and what I learned in my one tax class in grad school years ago. I go to my own tax expert for 99% of tax questions. I also wouldn't pay you a time without a signed SOW and strict limits on discretionary spending :) 
 

MLaw06

January 15th, 2014 at 6:17 PM ^

Someone can always donate on your behalf (for example, I can donate $10 to Adopt-a-Wolverine Society and adopt a wolverine in your name, but since I paid for it and thus was the donor, then only I can take the deduction). 

The OP seems to be talking specifically about a secondary market purchase (and my point is that only the primary donor, who often is the primary purchaser, could take the donation deduction).

LSAClassOf2000

January 15th, 2014 at 5:17 PM ^

The FAQ for the Premium Seatings isn't terribly helpful sadly, here's what it does say though:

"IRS rules allow for a charitable deduction for qualifying donations associated with University-sponsored athletic events. The tax code provides for an 80 percent charitable deduction for gifts associated with premium seating at college events. Consult your tax adviser regarding your situation."

MLaw06

January 15th, 2014 at 6:22 PM ^

That is the PSD rule.  I.e., unlike a typical donation to a university (where you can deduct 100% of your donation), a PSD can only be deducted at 80%. 

The reason for this is usually you have to net out any benefits you receive from your donation, but since that's hard to do here and impractical, they have a hard and fast 80/20 rule (80% deduction/20% benefit).

Otherwise, it's like when you go to a charity gala and you donate $500 for a seat, but the food costs $200 so they tell you that you can only deduct $300.

GRFS11

January 15th, 2014 at 6:35 PM ^

So, summing up mine and others' comments above, if your friend has already paid the PSDs, you are probably out of luck.  But, if he/she hasn't paid yet, see if you can pay the PSD directly to the university instead, and you would get the write-off.

BluePants

January 15th, 2014 at 7:04 PM ^

26 USC § 170(l): (Treatment of certain amounts paid to or for the benefit of institutions of higher education

(1) In general- For purposes of this section, 80 percent of any amount described in paragraph (2) shall be treated as a charitable contribution.

(2) Amount described- For purposes of paragraph (1), an amount is described in this paragraph if—

     (A) the amount is paid by the taxpayer to or for the benefit of an educational organization—    

        (i) which is described in subsection (b)(1)(A)(ii), and

        (ii) which is an institution of higher education (as defined in section 3304 (f)), and

     (B) such amount would be allowable as a deduction under this section but for the fact that the taxpayer receives (directly or indirectly) as a result of paying such amount the right to purchase tickets for seating at an athletic event in an athletic stadium of such institution.

If any portion of a payment is for the purchase of such tickets, such portion and the remaining portion (if any) of such payment shall be treated as separate amounts for purposes of this subsection.

Source: http://www.law.cornell.edu/uscode/text/26/170

NOTE: this is NOT legal or tax advice. Please consult your professional.

JamieH

January 15th, 2014 at 7:23 PM ^

Pretty sure you can have someone else pay it for tax purposes, but if you have already paid it, then you cannot have someone pay you for it and transfer the tax write off to them.   BTW my season ticket purchaser just bailed out on me too.  Could be an interesting year for selling season tickets.

bluebyyou

January 15th, 2014 at 9:25 PM ^

If you take a deduction and sell your tickets, depening upon the sale price, TECHNICALLY, couldn't that be considered a short term capital gain and require reporting to the IRS (yeah, right).

MLaw06

January 15th, 2014 at 9:47 PM ^

Sorry, but that's not what a capital gain is (since that has nothing to do with a capital asset).

"Capital Gain" Definition = An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short term (one year or less) or long term (more than one year) and must be claimed on income taxes. A capital loss is incurred when there is a decrease in the capital asset value compared to an asset's purchase price.

bluebyyou

January 15th, 2014 at 10:37 PM ^

Wouldn't the IRS look at the nature of the transaction to classify the type of gain on sale.   If you routinely bought and sold tickets, income (or loss) would be considered ordinary income. If, however you invested one time in the purchase of  an asset, which a set of season tickets could be considered to be, wouldn't gain on the sale of the asset be considered to be a capital gain. 

MLaw06

January 16th, 2014 at 12:44 AM ^

I'm not a tax expert by any means, but I don't see a sports ticket as an investment. In fact, it's (almost) always going to be worth zero on the day after the event.

In addition, if I really saw this as an investment in a capital asset, then I could also argue that I should take a capital loss on my tickets if I end up losing money.  I'm pretty sure that the IRS would laugh at my argument when I say that I bought my tickets for face value, but no one wanted to watch the Michigan vs. Akron game so I have to take a capital loss and I want to deduct these capital losses on my tax return.

MLaw06

January 15th, 2014 at 9:43 PM ^

Well, it's not a capital gain... and by that, I mean it's not a gain attributable to your investment of capital.  Rather, it would be income to you, and therefore, you would be subject to income tax, as noted above.

A ticket is merchandise, if you buy it for $100 and sell it for $200, then you owe taxes on the $100 of net income. 

The fact that you take a deduction on the original price of the ticket means that the basis of the ticket (i.e., your merchandise cost) has been reduced.  For example, let's say as a result of taking the deduction, you get $25 back.  Then, your basis is now $75.

Result: You sell tickets for $200, then you subtract $75 (which is your after-deduction adjusted basis), which leaves $125 of net income.  You will then have to pay income tax on $125.  The deduction will still be allowed since you still made your donation.

IRS Circular 230 Disclosure:   To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under federal, state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.