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Old 11-17-2017, 06:15 PM
Hawzmolly Hawzmolly is offline
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Donations

Donations:

I am the treasurer to an existing 501c3 organization. We are a model railroad club. We receive donations of model railroad equipment, some old, some used, some almost new most are from the relatives of the deceased. Some items are new and donated to the club. These donations are almost always relative to the club i.e., model railroad stuff.

Some of the items received are junk and thrown away while some items we are able to sell to earn money for the club. We do not place a value upon these donations for those who made the donation. We do issue a letter of thanks stating that the club can not place a value on the donation due to IRS rules. In the case of new items bought by members or non-members we do issue a letter stating the amount and description of the donation.

I am very new to Quickbooks and I am beginning to establish our “Chart of Accounts”.

My question is, where do we account for these donations?
• In Assets – we now own the items;
• In Revenue – We are free to keep the items and use the items as we see fit and increasing our fixed or other asset value, sell the items to club members or non-members therefore receiving an income, or trashing items we can not sell or use.
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Old 11-22-2017, 12:38 PM
Lorin Browning Lorin Browning is offline
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Location: Landrum SC
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Such donations are reported in the various Gifts in Kind accounts.

Whenever possible, you want to determine a fair-market value of the gift in kind and add it to the books as income.

Your board needs to make a decision as to the threshold of the FMV of gift-in-kind donations you receive that will be recorded on your book. If a donation is sold, it should go on your book at the selling price. If a donation is used by the charity it should go on your books at FMV

Remember that the original letter from IRS announcing your 501(c)(3) status indicated two important classifications of your charity by IRS: (1) that the charity is (normally) exempt from being taxed on its revenues, and (2) contribution to your charity are (normally) deductible on the taxpayers' tax return.

Reporting gifts-in-kind helps to maximize your reported revenue. Maximizing your income serves at least two purposes: It helps to maintain the public charity status (which allows contributors to deduct contributions made to you), and the ratio of management expense to total revenue continues to look attractive to your donors.

IRS includes gift-in-kind revenue in the first line –" Contributions, gifts, grants and similar amounts received”-- of Part I of the Form 990-EZ. (I'm assuming that you are not filing the more complicated Form 990.) Gift-in-kind is also included in Part III of Schedule A to for IRS to determine whether your organization retains its status as a public charity.

Here’s how I would report a gift-in-kind donation that is equal to or greater than the reporting threshold adopted by the board:

I would have three accounts:

1. Gifts-in kind as an income account for the Statement of Activities report
2. Gift-in-kind as an expense account for the Statement of Activities report
3. Gift-in-kind as a current asset account on the Statement of Financial Condition report
Note that “Statement of Activities” and “Statement of Financial Condition” are not-for-profit-speak for what are called Income Statement (or Profit and Loss Statement) and Balance Sheet in the for-profit world.
• All of the gifts-in-kind would be posted as credits to the gift-in-kind income account.
• All of the gifts-in-kind would be posted as debits to the gift-in-kind current asset account.

To get gifts-in-kind out of current assets depends upon what you are doing to do with each specific gift in kind. Here are some examples for gifts-in-kind above threshold amount:

• Someone gives a book of stamps which you use: Post amount as credit to current asset account; post as debit to postage expense.
• Someone gives a file cabinet which will be used by the 501(c)(3): Post amount as credit to current asset account; post as debit to furniture, fixtures, etc. other asset account.
• Item is sold: Post amount :credit to current asset account; post as debit to cash. Note: If sold for a different amount than was originally entered, you should just the original entries to actual selling price.
• Item becomes worthless: Post amount as credit to current asset account; post as debit to obsolete asset account (or some similar expense account)
• Gift of equipment used by club: Post amount as credit to current asset account; post as debit to appropriate equipment asset account.
__________________
Lorin Browning, Ph. D.
Fellow -- National Tax Practice Institute
lorin@lorinbrowning.com

Last edited by Lorin Browning; 11-23-2017 at 03:12 PM.
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