USA Recycling Instruments for Donation

[BluesDude]

I'm a sole proprietor & established L3C in Illinois. It is not a Non-Profit, it is a Low Profit Limited Liability Company. I'm engage in the business of recycling guitars.

I have folks donated guitars to me in poor to good condition. I make minor to major repairs and then donate them to someone who may need it. I donated one to a missionary, one to an individual child in need and donated to a non-profit Autistic kids with a music program.

Can someone help me figure out how to account for 1) a donation to me (I'm not a non-profit but still inventory), 2) adding the cost of repairs to the inhouse guitar being repaired, and 3) accounting for the giving of the guitar to an individual or non-profit?

Any help would be of great assistance and greatly appreciated.

 

[BIG E]

"I have folks donated guitars to me in poor to good condition."
Are these folks looking for a charitable donation somehow? Once they turn the instrument over to you, is there any
expectation of it being returned to them? How do you make money upon improving the instrument you are given
whether or not you then donate it? Do they pay you a fee for the service of improving it or FMV of the instrument regardless of what you do
with it afterwards?

Since your entity is a for-profit entity, how can you determine a FMV for property that is not yours, and then
expect a charitable donation to a third party recipient? Giving the instrument to a personal individual is not a
charitable donation item.

You seem to be mixing a number of functions of business activity, personal services, donations that are not clear.

 

[BluesDude]

"I have folks donated guitars to me in poor to good condition."
Are these folks looking for a charitable donation somehow? Once they turn the instrument over to you, is there any
expectation of it being returned to them? How do you make money upon improving the instrument you are given
whether or not you then donate it? Do they pay you a fee for the service of improving it or FMV of the instrument regardless of what you do
with it afterwards?

Since your entity is a for-profit entity, how can you determine a FMV for property that is not yours, and then
expect a charitable donation to a third party recipient? Giving the instrument to a personal individual is not a
charitable donation item.

You seem to be mixing a number of functions of business activity, personal services, donations that are not clear.

No, they are not looking to get a charitable deduction. The donation is free and clear with no expectation of return. I will only make money if I sell the item and give part of the proceed to a charitable organization. Else the guitar is given o me free and clear, I put a small amount of money into it, sometime more time than money, then give it to someone who I think needs it like that missionary or give it to a charitable organization.

I understand giving it to an individual is not a charitable deduction, I'm asking how I account for accepting a gift of little to no value, creating some value and then giving that product away.

 

[BIG E]

Read P. 6, middle column of this IRS Publication:

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

Donation of personal services is not deductible

 

[BluesDude]

When someone donates a guitar to me, my L3C as a sole proprietor, I know it's not deductible and they donor knows it's not deductible. Currently I have 7 donated guitars. I assume it's inventory (or an asset) to me or my business, correct? Do I record it at salvage value or look up prices on the internet? So, I fix the guitars up, I put $50 into each guitar, I assume I can't attach my labor hours to them, So, now each guitar has a FMV of $100.

At this point I have inventory and inventory with increase cost associated with it.

Next, I make an appointment at a local hospital system that has a music program for Autistic children to donate the repaired guitars for their program. So, I have a decrease in inventory (or assets) and since it's a 501(3)c that I'm donating to do I as an individual or company get to deduct the FMV of the repaired guitar?

If I give one guitar away to a person who is a missionary, obviously I can't deduct as charitable donation, but do I account for the gift as advertising. I'm removing on of my guitars from inventory and then where does the entry go?

 

[BIG E]

You have NO INVENTORY - it didn't cost you anything. Donative value is the LOWER of COST or FMV. No cost = $ -0-
The only thing you did was provide services to it that can't be deducted.
Do you have any insurance policy to protect the guitars should they be damaged somehow while in your possession?
You need tangible proof documentation of these events in order to claim any tax benefits.
From what you describe, there is no applicable bookkeeping entry.

 

[BluesDude]

Wow, okay. Makes sense.

 

[vantageboxes]

Consider donating your unused instruments to schools, community centers, or music programs. Recycling instruments in this way gives others access to music education and fosters a love for music in the community. Your donation can make a meaningful impact on someone's life.

 

[harrisonquelt]

Happy to witness this! Amazing understanding and the clarity of detail distributed is fantastic!
Thanks!