Question

Question on deduction by author of new books to 501c3

Forum|Forum|2 years ago
April 11, 2024
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I am an author who prints and drop ships new books to a 501c3 that takes the books and distributes them as part of their mission. The donated books are not resold. These books are also available at retail online and have a verifiable retail value they sell at. I've been going over the IRS documentation, but am finding it a bit confusing as to what my valuation should be since the donated items are not for resale, but are indeed used for charitable distribution. I haven't been able to find any answers that address my specific scenario, and don't want to enter things incorrectly. A point int the right direction would be greatly appreciated. Thanks!

O

Opus 17

Employee

Your valuation is your cost basis. Look at publication 526 under "Ordinary income property."

https://www.irs.gov/pub/irs-pdf/p526.pdf

Generally, that means the cost you paid to have the books printed. If there are adjustments for other costs (such as research expenses or other writing expenses) I don't know how to make those calculations and you likely should see a professional.

Basically, the donation value is the fair market value minus the amount of taxable profit you would show on a tax return if you sold it at that price. This is easy to calculate for some things. If you are a painter, and you normally sell a painting for $500, and you normally deduct $100 for the cost of canvas, frame and paint, then your profit is $400. So the donation value is FMV of $500 minus the profit you would have had of $400, equals $100, and it is not a coincidence that this equals the cost of materials.

I'm not sure how the profit on a book is calculated. I assume it could include other costs besides printing, such as travel (if you traveled to write the book), research costs, the cost of hiring an editor or typist, and so on. Your donation value is the selling price of the book minus the profit that you would have to report if you reported the sale on your tax return. If you need further help, you should talk to a tax professional.