donated produce to charity

[tax queen]

w-2 earner who gardens and gives much of his produce to charity--has been taking fmv of produce but I'm thinking only entitled to cost of putting produce in because if he sold the produce it would be ordinary income

[Lion]

Lower...

Lower of cost or FMV.

[ChEAr$]

Lower of cost or FMV.

Correct. And now the fun begins, how to determine cost. Lets' see, a 25 cent package of Burpee seeds......... pro rate the cost of any fertilizer between donated amount and personal amount........ Labor? nope.

Fun, eh?

[thomtax]

I had one of these a few years ago, and he gave quite a bit. Kill a calf and give half to different organizations. After I would not go with fmv, the stopped coming to me. He found someone else that would lie for him, I guess.

LT

[JohnH]

Back in the 70's one of my pastor clients had a church member who would ask him for a receipt at year-end for the value of the produce he had given the pastor each year so he could deduct it on his taxes.

I told the pastor it was fine to write him a thank-you note, but not on church letterhead, not to assign a value to the produce, and not to represent it as being tax deductible. After all, he didn't want the fresh tomatoes, cucumbers, & squash to stop coming in. (However, I did wonder sometimes if the church member was passing this info along to the finance committee so they could take it into account when setting the pastor's salary).

[Black Bart]

Sad but true, my queen.

...I'm thinking only entitled to cost of putting produce in...

But...that's the way it grows.

Thom's right though; if you tell him (1) how the cow ate the cabbage (2) which way the hog went (3) no to FMV, then you're likely to lose him. Sure is tough bein' ethical nowadays, ain't it?

On the same note: Eons ago (just after IRS began requiring $600+ 1099s) I asked an inherited client about the $10,000 "machine work hired" expense on his list.

BB: Who's this?
IC: That's me.
BB: What?
IC: I said, That's me.
BB:
IC: Well?
BB: Uh...hmm, well, umm, uh...see, you can't, ah, uh...you can't do that.
IC: Can't do what?
BB: Deduct your own labor. IRS doesn't allow it.
IC: I don't see why the hell not! It would cost that to hire somebody else to cut those beans and I'm as good a hand as there is around -- ask anybody! Besides, I been takin' it off for ten years and nobody's complained.
BB: Sorry, but I can't do it.

Without another word, IC took his list and left (and hasn't been back).**

P.S. You're new, aren't you? Welcome to the club -- nice to have you and maybe we'll be able to help find a deductible tater later...

**Note to interested IRS parties -- he's dead and left all his money to a dog and cat hospital.

[JohnH]

The client could hire Dan Rather to pick his beans.
Then he'd be able to deduct what he paid his commen-tater.

[Burke]

Oh, John........... You're really getting punchy, aren't you? Been at this too long today. Me, too. Going to get an Exedrin and a Coke. And maybe some of those chocolate-covered coffee expresso beans.

[Roland Slugg]

Lone voice in the wilderness ... again

The original post stated that the T/P is a W-2 employee, so I'm assuming that the "produce" he gives to charities is NOT inventory of his farming business or produce stand.

Accordingly, if the produce was more than a year old, so that if sold it would give rise to LTCG, then the charitable deduction would properly be based on the goods' FMV at the time donated, not its cost.

I realize that much produce, when sold, is less than a year old. But not all. Lettuce, tomatoes and corn, yes ... but nuts, avocados, and many fruits like apples and oranges come from plants and trees that may be several years old.

So my answer to the OP is: It depends on the nature of the gain that would arise if the donated produce had been sold. If LTCG, the deduction is FMV, but if ordinary income or STCG, the deduction is limited to basis.

[Larmil]

The original post stated that the T/P is a W-2 employee, so I'm assuming that the "produce" he gives to charities is NOT inventory of his farming business or produce stand.

Accordingly, if the produce was more than a year old, so that if sold it would give rise to LTCG, then the charitable deduction would properly be based on the goods' FMV at the time donated, not its cost.

I realize that much produce, when sold, is less than a year old. But not all. Lettuce, tomatoes and corn, yes ... but nuts, avocados, and many fruits like apples and oranges come from plants and trees that may be several years old.

So my answer to the OP is: It depends on the nature of the gain that would arise if the donated produce had been sold. If LTCG, the deduction is FMV, but if ordinary income or STCG, the deduction is limited to basis.

...and a partridge in a PEAR tree!

[JohnH]

It's all Bart's fault.
I'm just sitting here in my usual fog, minding my own business, then he throws down a comment I just can't resist.

Don't say it's the dumbest thing I've ever posted - I have plenty of other evidence to refute THAT.

[Black Bart]

Thanks John (and Roland),

It's all Bart's fault.
I'm just sitting here in my usual fog, minding my own business, then he throws down a comment I just can't resist....

Live and learn, I say.

Here I was thinkin' that ol' cheapskate down the road who sold me that sack'uh dried-up/out pecans last year was tryin' to skin me and make a buck outta nothin' and now Roland's figgered out the straight of it -- she was simply after long-term capital gains (gotta give myself a good chastizin' for thinkin' bad about folks).

[Burke]

The original post stated that the T/P is a W-2 employee, so I'm assuming that the "produce" he gives to charities is NOT inventory of his farming business or produce stand.

Well, I think it was. OP said he "gardens and gives away much of his produce......"
Same situation with anyone who produces a product. Had an artist who would donate a piece to a charitable organization about once per year, and had to explain he had already deducted all his costs on the Sche C, therefore no further deduction.