Curious about charity running sweepstakes

One of our local NPR stations has been advertising that if you pledge by
tomorrow you'll be entered in a drawing to win a trip to see "Wait,
Wait, Don't Tell Me" in Chicago. That got me curious about the tax
treatment of this.

If you make a donation to a charity and receive a premium in return,
you're supposed to reduce the amount you deduct by its value. How does
this work in the case of a drawing? If the prize is worth $1,000, and
there are 1,000 entries, is the value of the premium $1 for each of
them, or does the winner get $1,000 in income that he would have to
report (minus his contribution)?

--
Barry Margolin,
Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***

--
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"Barry Margolin" <> wrote
> One of our local NPR stations has been advertising that if you pledge by
> tomorrow you'll be entered in a drawing to win a trip to see "Wait,
> Wait, Don't Tell Me" in Chicago. That got me curious about the tax
> treatment of this.
>
> If you make a donation to a charity and receive a premium in return,
> you're supposed to reduce the amount you deduct by its value. How does
> this work in the case of a drawing? If the prize is worth $1,000, and
> there are 1,000 entries, is the value of the premium $1 for each of
> them, or does the winner get $1,000 in income that he would have to
> report (minus his contribution)?



The winner receives income for the value of the prize.

The station should issue a 1099 - but often times this gets overlooked.

Also, in some states or localities there is a registration process for these
types of gaming activities. Georgia requires it, and I suspect other states
may also.





--
Paul A. Thomas, CPA
Athens, Georgia

--
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"Paul Thomas" <> wrote in message
news:adDZl.11265$.. .
> "Barry Margolin" <> wrote
> > One of our local NPR stations has been advertising that if you pledge
by
> > tomorrow you'll be entered in a drawing to win a trip to see "Wait,
> > Wait, Don't Tell Me" in Chicago. That got me curious about the tax
> > treatment of this.
> >
> > If you make a donation to a charity and receive a premium in return,
> > you're supposed to reduce the amount you deduct by its value. How does
> > this work in the case of a drawing? If the prize is worth $1,000, and
> > there are 1,000 entries, is the value of the premium $1 for each of
> > them, or does the winner get $1,000 in income that he would have to
> > report (minus his contribution)?
>
> The winner receives income for the value of the prize.
>
> The station should issue a 1099 - but often times this gets overlooked.
>
> Also, in some states or localities there is a registration process for
these
> types of gaming activities. Georgia requires it, and I suspect other
states
> may also.

Why not a W-2G? Granted they aren't in the business of wagering, but this
income is proceeds from gambling where the proceeds exceeded 200x the bet.

However, a pool of $500 with 1,000 entries worth $1 each is more
appropriate for a charity as it then pockets $500 for its charitable
purpose.

--
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
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In article <h174d6$v5f$>,
D. Stussy <> wrote:
>"Paul Thomas" <> wrote in message
>news:adDZl.11265$. ..
>> "Barry Margolin" <> wrote
>> > One of our local NPR stations has been advertising that if you pledge
>by
>> > tomorrow you'll be entered in a drawing to win a trip to see "Wait,
>> > Wait, Don't Tell Me" in Chicago. That got me curious about the tax
>> > treatment of this.
>> >
>> > If you make a donation to a charity and receive a premium in return,
>> > you're supposed to reduce the amount you deduct by its value. How does
>> > this work in the case of a drawing? If the prize is worth $1,000, and
>> > there are 1,000 entries, is the value of the premium $1 for each of
>> > them, or does the winner get $1,000 in income that he would have to
>> > report (minus his contribution)?
>>
>> The winner receives income for the value of the prize.
>>
>> The station should issue a 1099 - but often times this gets overlooked.
>>
>> Also, in some states or localities there is a registration process for
>these
>> types of gaming activities. Georgia requires it, and I suspect other
>states
>> may also.
>
>Why not a W-2G? Granted they aren't in the business of wagering, but this
>income is proceeds from gambling where the proceeds exceeded 200x the bet.
>
>However, a pool of $500 with 1,000 entries worth $1 each is more
>appropriate for a charity as it then pockets $500 for its charitable
>purpose.


For gambling winnings, it's a W-2G if required, and for prizes, it's
a 1099-Misc box 3.


The W-2G instrictions has an overview of what gambling is, but I agree
it's a thinline betwen some gambling and some prizes.


To make it worse, look at some Table games that also have a kitty
with them. Perhaps you are playin poker and each hand you contribute
$1 to the "bad beat" pool.

A "bad beat" occurs when you have a very good hand and are beat
by a better hand. Say you have 4 aces and are beaten by a straight
flush, that's a nasty bad beat, and if you contributed to the Bad
Beat kitty/pool, you get most of that pool, after the house takes its
cut of the kitty.


Poker players might get a W-2G but those who receive the Bad beat
kitty get issued a 1099-Misc box 3 for sitting in on the same
poker game at the same table at the same casino.
--

ArtKamlet at a o l dot c o m Columbus OH K2PZH

--
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
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"D. Stussy" <> wrote
> Why not a W-2G? Granted they aren't in the business of wagering, but this
> income is proceeds from gambling where the proceeds exceeded 200x the bet.



I don't know if raffles done by a charity are considered gambling.





> However, a pool of $500 with 1,000 entries worth $1 each is more
> appropriate for a charity as it then pockets $500 for its charitable
> purpose.




The only way to make real money on these types of things is to get the prize
donated of at a seriously reduced price to the charity.

--
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
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<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
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"Barry Margolin" <> wrote in message
news:barmar-...
> One of our local NPR stations has been advertising that if you pledge by
> tomorrow you'll be entered in a drawing to win a trip to see "Wait,
> Wait, Don't Tell Me" in Chicago. That got me curious about the tax
> treatment of this.
>
> If you make a donation to a charity and receive a premium in return,
> you're supposed to reduce the amount you deduct by its value. How does
> this work in the case of a drawing? If the prize is worth $1,000, and
> there are 1,000 entries, is the value of the premium $1 for each of
> them, or does the winner get $1,000 in income that he would have to
> report (minus his contribution)?

the other posts I have seen thus far discuss what happens when you win. I
don't know that was the OP's question. How do you deduct the payment (er,
"contribution") you made for the raffle ticket? I thought I've seen here on
MTM that raffle tickets do not qualify as a charitable deduction; others can
state yeah or nay with more authority than I.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

In article <5LUZl.73237$>,
123go <> wrote:
>
>"Barry Margolin" <> wrote in message
>news:barmar-...
>> One of our local NPR stations has been advertising that if you pledge by
>> tomorrow you'll be entered in a drawing to win a trip to see "Wait,
>> Wait, Don't Tell Me" in Chicago. That got me curious about the tax
>> treatment of this.
>>
>> If you make a donation to a charity and receive a premium in return,
>> you're supposed to reduce the amount you deduct by its value. How does
>> this work in the case of a drawing? If the prize is worth $1,000, and
>> there are 1,000 entries, is the value of the premium $1 for each of
>> them, or does the winner get $1,000 in income that he would have to
>> report (minus his contribution)?
>
>the other posts I have seen thus far discuss what happens when you win. I
>don't know that was the OP's question. How do you deduct the payment (er,
>"contribution") you made for the raffle ticket? I thought I've seen here on
>MTM that raffle tickets do not qualify as a charitable deduction; others can
>state yeah or nay with more authority than I.


If you purchase a raffle ticket and before the drawing you donate it
to a charity, you may have a deduction for the cost of the ticket.

If it should win, you are still limited to the cost.

Another related article:

http://www.michigan.gov/cg/0,1607,7-...7984--,00.html


--

ArtKamlet at a o l dot c o m Columbus OH K2PZH

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

>I thought I've seen here on
>MTM that raffle tickets do not qualify as a charitable deduction;

That is correct. Here is a quote from Pub. 526, page 7:

"Costs of raffles, bingo, lottery, etc. -- You cannot deduct
as a charitable contribution amounts you pay to buy raffle
or lottery tickets or to play bingo or other games of
chance."

Bob Sandler

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
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<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

"Barry Margolin" <> wrote in message
news:barmar-...
> One of our local NPR stations has been advertising that if you pledge by
> tomorrow you'll be entered in a drawing to win a trip to see "Wait,
> Wait, Don't Tell Me" in Chicago. That got me curious about the tax
> treatment of this.
>
> If you make a donation to a charity and receive a premium in return,
> you're supposed to reduce the amount you deduct by its value. How does
> this work in the case of a drawing? If the prize is worth $1,000, and
> there are 1,000 entries, is the value of the premium $1 for each of
> them, or does the winner get $1,000 in income that he would have to
> report (minus his contribution)?

The winner gets $999 of income. The first $1 is the return of his bet.
There is NO deduction to charity involved here. It is gambling, even if
sponsored by a qualified charity.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

In article <5LUZl.73237$>,
"123go" <> wrote:

> the other posts I have seen thus far discuss what happens when you win. I
> don't know that was the OP's question. How do you deduct the payment (er,
> "contribution") you made for the raffle ticket? I thought I've seen here on
> MTM that raffle tickets do not qualify as a charitable deduction; others can
> state yeah or nay with more authority than I.

Is there really a "raffle ticket"? It's not like you're being entered
into a raffle that someone else could simply purchase a ticket for.
Only people who donate to the charity are eligible for the drawing.

--
Barry Margolin,
Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>