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Determine Fair Market Value Calculator
Many organizations ask us for advice on determining Fair Market Value (FMV), so we created an easy-to-use calculator to assist you.
Why is determining Fair Market Value important?
- Transparency and Trust
- Legal Compliance
- Deductibility of Donations
Determining Fair Market Value can be tricky as it involves estimating overall event expenses based on the expected number of attendees. The calculator below is designed to help you estimate the Fair Market Values for your tickets and sponsorship levels.
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Why is determining Fair Market Value important?
1. Transparency and Trust:
Using FMV for tickets and sponsorships ensures donors understand the true value of what they are receiving in return for their contributions. This transparency helps build and maintain trust with donors, encouraging continued support.
2. Legal Compliance:
Nonprofits are required by law to provide accurate value assessments for any goods or services provided in exchange for donations. This compliance protects the organization from legal issues and potential penalties.
3. Financial Integrity:
Applying FMV maintains the financial integrity of the organization. It ensures that the reported revenue from events and fundraisers is accurate, reflecting the real economic benefit received.
4. Donor Awareness:
When donors are aware of the FMV of benefits they receive, they can make informed decisions about their giving. It also helps them understand the tax-deductible portion of their contributions.
Tax Perspective
1. Deductibility of Donations:
For a donation to be tax-deductible, the donor must know the FMV of any goods or services received in return. The IRS requires that the nonprofit provide this information. The deductible amount is the total donation minus the FMV of any received benefits.
2. Proper Reporting:
Nonprofits must accurately report the FMV of goods and services on their tax forms (e.g., Form 990). This proper reporting ensures the organization stays in good standing with tax authorities.
3. Avoiding Penalties:
Providing clear information about FMV in gift acknowledgments (receipts) helps donors when they prepare their tax returns. This acknowledgment is crucial for donors who intend to claim their donations as deductions.
In summary, applying Fair Market Values in nonprofit transactions is essential for maintaining transparency, ensuring legal compliance, and providing accurate information for tax purposes. It benefits both the organization and its donors by upholding the integrity and trustworthiness of charitable efforts.
HelloFund does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.