What does "the amount of an advantage" refer to in "the difference between the fair market value of the donated item and the amount of an advantage, if any, is the qualifying amount of a gift"? Could someone please give an example? Thank you!
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Note that the clause in the link relates to gifts made to such as a registered charity or municipality. I suppose, that if your membership subscription to a charitable society is $100 and you donate something of market value $150 to pay for it, the qualifying amount on which you will get a tax credit is $50.– Weather VaneCommented Jan 29, 2023 at 23:20
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1 Answer
I believe that what is being discussed is a situation like a bargain sale or a below market rental arrangement.
I think what makes the phrase "The difference between the fair market value of the donated item and the amount of an advantage, if any, is the qualifying amount of a gift" is that the sentence should really clarify that they are talking about the advantage to the donor.
Suppose that you grandfather allows you to buy a yacht, which he purchased the previous day in an arms-length transaction with a third-party which is presumptively fair market value at $10,000,000 for $100,000. The advantage to your grandfather is $100,000, and the fair market value of the gift is $9,900,000.
A more common situation for this to come up would be a charity auction, where you bid far more than fair market value on an item, in order to benefit the charity. You might bid $1,000 for a one night stay at a local motel that usually charges $100 for that. What you give is $1,000 cash less the advantage of $100 that you receive.
answered Jan 30, 2023 at 17:51
