Inventory Donation Tax Benefits

Donate Smart - Double Your Deduction

Not All Donations Are The Same

Typically, when you dispose of excess or unused inventory you can only deduct its cost. Donating is usually better, as organizations can instead give you a tax receipt for the Fair Market Value of the donation

WIN, however, doubles the benefit of your donation by qualifying for a special rule by the U.S. government. Donations to WIN may allow your organization to claim the inventory’s cost plus half the difference between cost and fair market value up to twice the cost, or a double tax write-off.

Donating	vs	Liquidating
Reduces Gross Income Donating goods is considered a loss by the government, reducing your gross income so you pay less in taxes. This tax benefit is often MORE than the income you’d get from liquidating.		Adds to Gross Revenue Liquidating goods results in added revenue, so you pay more in taxes. This added revenue from these goods is often LESS than the tax return you’d get from donating them.
200% Tax Deduction C Corps can receive a federal tax deduction equal to up to 200% of the cost (basis) of the donated products.		5-8% Return on Goods Liquidators will often pay only 5-8% of retail value.
Help Others in Need Donated goods create real benefits for the nonprofits that receive them.		Positive Brand Perception Liquidating goods can harm a brand by devaluing it in the eyes of consumers.
Positive Brand Perception Companies that are involved with charities are often perceived better by consumers.		Nothing to Boast About Liquidating goods does nothing to differentiate a brand from its competitors.

Donating vs Liquidating
Reduces Gross Income Donating goods is considered a loss by the government, reducing your gross income so you pay less in taxes. This tax benefit is often MORE than the income you’d get from liquidating. Adds to Gross Revenue Liquidating goods results in added revenue, so you pay more in taxes. This added revenue from these goods is often LESS than the tax return you’d get from donating them
200% Tax Deduction C Corps can receive a federal tax deduction equal to up to 200% of the cost (basis) of the donated products. 5-8% Return on Goods Liquidators will often pay only 5-8% of retail value.
Help Others in Need Donated goods create real benefits for the nonprofits that receive them. Positive Brand Perception Liquidated goods offer no benefit beyond a relatively small monetary gain.
Positive Brand Perception Companies that are involved with charities are often perceived better by consumers. Nothing to Boast About Liquidating goods can harm a brand by devaluing it in the eyes of consumers.

This is because the goods you donate aren’t sold – they are used. When you donate to WIN, your excess inventory ends up in the hands of nonprofits to help them further their mission. Take a look at some of the amazing things WIN members have already accomplished.

What is Tax Code 170(e)?

(3) Special rule for certain contributions of inventory and other property

(A) Qualified contributions for purposes of this paragraph, a qualified contribution shall mean a charitable contribution of property described in paragraph (1) or (2) of section 1221(a), by a corporation (other than a corporation which is an S corporation) to an organization which is described in section 501(c)(3) and is exempt under section 501(a) (other than a private foundation, as defined in section 509(a), which is not an operating foundation, as defined in section 4942(j)(3)), but only if—

• (i) the use of the property by the donee is related to the purpose or function constituting the basis for its exemption under section 501 and the property is to be used by the donee solely for the care of the ill, the needy, or infants;
• (ii) the property is not transferred by the donee in exchange for money, other property, or services;
• (iii) the taxpayer receives from the donee a written statement representing that its use and disposition of the property will be in accordance with the provisions of clauses (i) and (ii); and
• (iv) in the case where the property is subject to regulation under the Federal Food, Drug, and Cosmetic Act, as amended, such property must fully satisfy the applicable requirements of such Act and regulations promulgated thereunder on the date of transfer and for one hundred and eighty days prior thereto.

(B) Amount of reduction The reduction under paragraph (1)(A) for any qualified contribution (as defined in subparagraph (A)) shall be no greater than the sum of—

• (i) one-half of the amount computed under paragraph (1)(A) (computed without regard to this paragraph), and
• (ii) the amount (if any) by which the charitable contribution deduction under this section for any qualified contribution (computed by taking into account the amount determined in clause (i), but without regard to this clause) exceeds twice the basis of such property.

Why WIN?

WIN is more than a warehouse or a provider of goods. We are, in fact, a provider for Good. We are a dedicated community committed to helping nonprofit organizations realize their boundless potential. We connect organizations with the goods they need, with the goods that enable them to further their impact, to do more good.

WIN has been facilitating impact by connecting donated inventory with worthy non-profit organizations since 1991. Throughout our history, we have built many sound, structural relationships. We know that successful organizations and influential individuals are great because they are driven by purpose, not just profit. They build meaningful relationships, not just assets, accounts, and portfolios. And they thrive by surrounding themselves with kindred spirits who help drive them, deliver them and empower them to be awesome.

How can I verify WIN's non-profit status?

I am interested in donating excess merchandise to WIN. Is there a charge for this service? How does WIN operate?

What kind of product information do you need for our donation?

Will WIN pick up my donation?

Are there certain types of items that WIN will not accept?

There are certain types of items from which we shy away. An example would be hazardous items which require special disposal like CRT monitors.

Keep in mind that the entire purpose of accepting your donation is to get those items into the hands of non-profits who need them. With this in mind, WIN was founded upon the principal that we will “take it all, or not at all,” meaning that we do not cherry-pick items out of your donation. We will tell you up front whether or not we can accept your generous donation.

Does WIN accept perishable items?

What is the most important reason to donate inventory?

“Excess inventory for impact in our world.” How cool is that? And it’s not just an external battle cry or positioning statement; it’s an inspirational, aspirational reminder that every day is another opportunity to “do good.”

Donations from companies like yours, and from leaders like you, make a significant impact on charities all over our nation, and the world, and to the people and communities they serve. We know that successful organizations and influential individuals are great because they are driven by purpose, not just profit.

Can WIN show us how our donation makes an impact?

What are the financial advantages of donating versus disposal?

What are the financial advantages of donating versus liquidation?

Sometimes donation can be more profitable than liquidation. A corporation’s finance department or tax staff should analyze its numbers of cost, fair market value, and tax rate. The “break even” point is where donation and liquidation earn the same amount of benefit. The money you receive from liquidation – which is a sale of the product and is a very low percentage of cost – is taxable income. Also, consider the following intangible costs:

Storage: How much does warehouse cost per square foot?

The Cost of Sales: Donation liberates the sales force from concentrating on marginal or loss items to sell higher margin items.

Product Value: Items sold at liquidation prices may cause a “fire sale” and determine a lower market value for your product.

Who determines Fair Market Value (FMV)?

The IRS defines Fair Market Value as the price that would have been received had the taxpayer sold the contributed property in its traditional market. FMV may be tricky as the price may have changed due to factors such as obsolescence or decrease in demand. We recommend that you contract with an appraiser experienced in asset donation to offer you indemnity. We can refer such an appraiser for asset valuation upon request.

What happens to the inventory after it is donated?

WIN takes great care and invests significant resources to see that donated inventory gets in the hands of qualified organizations to make a maximum impact of good in our world.

That process starts from the time that we take possession of your donated inventory. We sort, catalog, and store donated stock every day. From there, WIN makes that inventory available to our non-profit members. Qualified non-profit members, serving the ill, needy, or infants, can order items from our online product catalog, or pick items up from our St. Louis showroom.

Where does donated inventory end up?

My company is an S Corporation. Can I benefit from a donation to WIN?

Under the IRS regulations, only C Corporations can directly receive the enhanced deduction (the amount above the cost) for donations of excess inventory. However, there are situations whereby S Corporation shareholders can obtain these same substantial tax benefits. We recommend you discuss these options with your CPA. If you are looking for a CPA referral, we would be happy to help point you in the right direction.

Where can I find more information about Title 26 of the US Tax Code, Section 170(e)(3)?

For your convenience, below are links to third parties, including the IRS with additional information. As tax laws change, and as your situation may be unique, we advise consulting a tax attorney before making your donation.

IRS Publication 526

CharitableContributions

IRS Publication 561

Determining the Value of Donated Property

Cornell Law School

26 U.S. Code § 170 — Charitable contributions and gifts

Inventory Donation Tax Benefits

Donate Smart - Double Your Deduction

Not All Donations Are The Same

CONTACT US

CORPORATE DONORS

NONPROFIT MEMBERS

Inventory Donation Tax Benefits

Donate Smart - Double Your Deduction

Not All Donations Are The Same

CONTACT US

CORPORATE DONORS

NONPROFIT MEMBERS

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