## Facts

- The Internal Revenue Service issued administrative guidance addressing frequent fundraising practices used by § 170(c) charitable organizations.
- Charities conducted fundraising activities such as balls, bazaars, banquets, shows, and athletic events involving ticket sales or other paid participation.
- Fundraising commonly occurred in two ways: (1) charging prices tied to the value of admissions/privileges/benefits, and (2) combining sales of those benefits with an additional solicitation for a gift above the benefit’s value.
- The IRS identified recurring public confusion and erroneous tax reporting, including advertisements or solicitations stating or implying that the entire ticket price or payment was deductible.
- The recurring tax question was how to determine whether, and to what extent, payments connected to such events qualified as charitable contribution deductions when the payor received goods, services, or other benefits.

## Issues

1. When a taxpayer makes a payment to a charitable organization in exchange for admissions or other benefits, to what extent (if any) is the payment deductible under I.R.C. § 170 as a charitable contribution?
2. How is the deductible amount measured when the taxpayer receives goods or services in return for the payment?
3. What general standards should apply to representations by charities about the deductibility of payments connected to fundraising events?

## Decision

- A deductible charitable contribution under § 170 requires a “gift,” which in this setting requires payment without adequate consideration.
- When a transaction is structured as a purchase of an item or privilege of substantial value, a presumption arises that the payment is the purchase price and not a gift.
- If the taxpayer receives goods or services in return, a deduction is allowed only for the portion of the payment that exceeds the fair market value of the benefits received, provided the excess reflects donative intent.
- If the payment does not exceed the fair market value of what the taxpayer receives, no portion is deductible as a charitable contribution.
- Charitable solicitations should not state that the entire amount paid is deductible when substantial goods or services are provided in return.

## Legal Principles

- Section 170 permits deductions only for “charitable contributions,” which require a gift rather than a bargained-for exchange.
- Adequate consideration negates gift treatment; receiving substantial benefits in return generally indicates a non-deductible purchase.
- For “dual character” payments (part purchase, part gift), the deductible amount equals: total payment minus fair market value of goods/services received.
- Donative intent and the payor’s understanding that part of the payment is a gift are relevant to allowing a deduction for any excess over fair market value.
- Mislabeling a purchase price as a fully deductible “contribution” is inconsistent with § 170 principles and can lead to improper deductions.

## Conclusion

The ruling applies § 170’s gift requirement to charity fundraising events by treating payments that purchase admissions or other substantial benefits as non-deductible to the extent of the benefits’ fair market value, allowing a deduction only for any excess paid with donative intent, and cautioning against representations that the full payment is deductible.


Rev. Rul. 67-246, 1967-2 C.B. 104 (1967)