Re: [GNC] Recording non-cash donations

[Borden via gnucash-user]

> Non-cash donations are tax deductible; for example, milage and fuel while
> delivering Meals on Wheels to shut-ins, books to the county library, and
> items given to Goodwill. For those of us who are sole members of an LLC the
> company's net profits roll over to our personal accounts so both business
> and personal donations (cash and non-cash) are reported on my personal tax
> reports.
>
> For years I've sent my accountant the proof of non-cash donations separate
> from the business and personal financial reports for tax preparation. I've
> decided now to record these in my personal books so they show up in the
> year's balance sheet and income statement.
>
>> If the item does have significant value but for some reason you never
>> entered them in your books, you would create one or more asset accounts
>> for them. Then you'd make two transactions for each item:
>> (1) Debit: asset account
>> Credit: Equity (I think this is a case for making a direct credit to
>> the main equity account, essentially a correcting item, because the item
>> is not new income but something that you've had all along but just not
>> in your books.)
>> (2) Debit: Expenses:Charity
>> Credit: asset account
>>
>
> I'll look closely at this. It makes sense and allows me to think about it
> until I see something from my accountant.
>
I'm Canadian-trained, so your CPA will have to direct you on the tax 
calculations. You are correct that they're fundamentally an expense to the 
business.

DR Expense & CR Asset, as suggested in (2) is fundamentally correct: charitable 
donations should be in an expense account. Credits go to the source account for 
the donation, which can be an asset or even an expense. Using your examples:

Meals on Wheels: when you gas up, get car maintenance, etc., you DR the 
appropriate automotive expense and credit cash/credit/shareholder 
contributions, etc. When you can reliably calculate the portion of those 
expenditures that are charitable, you DR donation and CR the appropriate 
automotive expense. The net result is that you're transferring the charitable 
value of your automotive expenses from your SG into donations.

Goodwill & library donations: unless the US system is fundamentally different 
from Canada's, asset disposals are calculated on fair market value, not book 
value, so there's an extra step. You need to write the value of the asset on 
the books down to its fair market value before booking the donation. Say you're 
donating old computers to Goodwill that have a cost basis of $1,000 and a book 
value of $500 (after depreciation). Goodwill says that the value of the 
computers is currently $400. Step one:  write down the computers to $400: DR 
Loss on asset disposal (or deprecation, depending on the tax rules) $100; CR 
Computer asset $100. Step two: record the donation, similar to the previous 
example: DR Donation expense $400; CR Computer asset $400. Or you can do it in 
one step if you're confident: DR Donation $400; DR loss on asset disposal $100; 
CR Computer asset $500.

Your accountant should be able to calculate the rest from there.

If you're astute, you'll notice that you can  have a _gain_ on an asset 
disposal when the FMV has increased over book value.  In this case, you'd have 
to credit the asset disposal (or depreciation, depending on the tax rules) 
account to balance the difference between the asset and the donation amounts. 
For example, if you donated a rare book to a library that has doubled from $100 
to $200 in value, then your entry would be: DR: Donation expense $200; CR: Rare 
book $100; CR: Gain on asset disposal $100.

Making direct contributions to Equity as suggested in (1) is _strongly_ 
discouraged, especially in corporations. You need to maintain  the corporation 
as an autonomous legal entity, so you cannot blend your equity with the 
corporation's. At least when filing Canadian returns, equity transactions are 
an easy way to get a call from CRA (Canada's IRS) as they expect Equity = 
shareholder capital + cumulative profits (or losses) over the life of the 
corporation.

I hope that helps.

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Re: [GNC] Recording non-cash donations

[Rich Shepard]

On Mon, 2 Aug 2021, Stan Brown wrote:


If you're donating items that have no value on your books, I'm not sure I
would call that a "donation" in accounting terms. You could keep a record
by entering a transaction that would have only one split, with Account =
your charity account and Debit and Credit both = 0.


Stan,

Non-cash donations are tax deductible; for example, milage and fuel while
delivering Meals on Wheels to shut-ins, books to the county library, and
items given to Goodwill. For those of us who are sole members of an LLC the
company's net profits roll over to our personal accounts so both business
and personal donations (cash and non-cash) are reported on my personal tax
reports.

For years I've sent my accountant the proof of non-cash donations separate
from the business and personal financial reports for tax preparation. I've
decided now to record these in my personal books so they show up in the
year's balance sheet and income statement.


If the item does have significant value but for some reason you never
entered them in your books, you would create one or more asset accounts
for them. Then you'd make two transactions for each item:
(1) Debit: asset account
   Credit: Equity (I think this is a case for making a direct credit to
the main equity account, essentially a correcting item, because the item
is not new income but something that you've had all along but just not
in your books.)
(2) Debit: Expenses:Charity
   Credit: asset account


I'll look closely at this. It makes sense and allows me to think about it
until I see something from my accountant.

Thanks for the idea,

Rich
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Re: [GNC] Recording non-cash donations

[Stan Brown]

On 2021-08-02 12:19, Rich Shepard wrote:
> While I've sent my account an email asking how to book non-cash donations
> I'm also asking here how folks do this. I can set up an Expense account for
> non-cash donations but cannot think of an appropriate off-setting
> account in
> Assets (since these are items and books I've owned but are now donating to
> Goodwill or the county library).
> 
> Your thoughts?

Hi, Rich!

The usual caveat: I am not an accountant or a tax professional.

If you're donating items that have no value on your books, I'm not sure
I would call that a "donation" in accounting terms. You could keep a
record by entering a transaction that would have only one split, with
Account = your charity account and Debit and Credit both = 0.

If the item does have significant value but for some reason you never
entered them in your books, you would create one or more asset accounts
for them. Then you'd make two transactions for each item:
(1) Debit: asset account
Credit: Equity (I think this is a case for making a direct credit to
the main equity account, essentially a correcting item, because the item
is not new income but something that you've had all along but just not
in your books.)
(2) Debit: Expenses:Charity
Credit: asset account

-- 
Stan Brown
Tehachapi, CA, USA
https://BrownMath.com
https://OakRoadSystems.com
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[GNC] Recording non-cash donations

[Rich Shepard]

While I've sent my account an email asking how to book non-cash donations
I'm also asking here how folks do this. I can set up an Expense account for
non-cash donations but cannot think of an appropriate off-setting account in
Assets (since these are items and books I've owned but are now donating to
Goodwill or the county library).

Your thoughts?

Rich
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Re: Recording non-cash donations

[Mike or Penny Novack]

On 2/13/2018 10:56 AM, Rich Shepard wrote:

Hi all,

  For tax purposes non-cash donations of goods and services are 
deductible.

I would like to track those as an account (or off-setting accounts) in
gnucash and do not find how best to do this in the guide or help docs. 
I'm

open to suggestions on how to track these transactions.

Regards,

Rich 

Clarify your question for us.

Are you asking "can I use gnucash to track this?" (yes) or "can I easily 
do this WITHIN my main gnucash books? (maybe not, and probably not 
simply, easily, etc.(


Remember, for reporting purposes, you still will be reporting these 
donations in terms of dollars. You will want to have some way of 
noting/marking which require the additional substantiating paperwork.


Since I do NOT use guncash for personal accounting (no personal "regular 
books") but do normally itemize and so need to track donations I do have 
a "virtual" Donations set of books. In my case, I also want to get a 
report that shows me not only total donations but which organizations on 
our "get an annual donation" have received theirs, for this I use a 
"funny" set of books that has ONLY accounts of type "income" and 
"expense". The income side has "by check", "by cash", and "in kind" and 
the expense side a tree of receiving entities. We wan to track 
non-deductible donations too, so those two categories are the main 
parents, deductible further broken into types of organizations, 
non-deductible into simple non 501(c) 3 ("informal entities", "beggars", 
"unknown status") and "PAC".


The only report I need to run against this is an "Income Statement"

As it happens, we make only trivial "in kind" donations", but if we were 
doing some substantial ones (that needed individual documentation) I 
would have split the "in kind" on the income side between those that did 
and those that didn't. Since these NOT by check, could always use the 
number field to mark when the documentation was in hand.


Michael D Novack

PS: I use guncash for other sorts of "virtual" entities. For example, 
one that treats our solar system AS IF it were an entity that had income 
and expenses, was operating on borrowed money on which it was paying 
interest as well as paying the loan back, and which later, perhaps, will 
be paying dividends after the loan is paid off. Additional expenses are 
things like its share of our property insurance, estimated affect on our 
taxes, etc. Income items are things like tax credits, credits to our 
electric bill, sale of SRECs (being taxable, would be an example of part 
of that going for an expense).


 MOST examples you see for solar systems discuss "payback" as if 
money were free of interest and/or there were no effects on other 
expenses. I wanted one which was realistic about a normal rate on a 20 
year fixed mortgage,other expenses, etc. I chose 4%, which at the time 
was GOOD for 20 year fixed, taxable interest, loan and this would 
actually be an internal (non-taxable) loan so really equivalent to AAA 
and ~5%


But looking at that set of books, not obvious "virtual" as 
otherwise appear more or less normal. Just that there ISN'T such an entity.

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Re: Recording non-cash donations [RESOLVED]

[Rich Shepard]

On Tue, 13 Feb 2018, Adrien Monteleone wrote:


That was quick, you answered your own question with a recommendation from
an accountant in 3 minutes. (at least by my clock)


Adrian,

  Well, it was actually longer than that when I came up with the solution
(and implemented it), and a couple of hours later met with my accountant.
The instant solution on the mail list was due to the question being delayed
in appearance on the list and my resolution appearing quickly. :-)


I'm curious for a clarification.


  Sure.


Does your accountant mean to expense the non-cash goods and services
provided at once? Or to hold these as deferred and expense them as used?
Or even to accept them as ‘revenue’ and later deduct them against matching
expenses?

Just curious. Overall, I think I see where she's going, I just want to
understand the advice better.


  Good questions. My business has always been run on a cash basis, not
accrual. When I take a load to Goodwill, or a bunch of books to the library
for resale I now enter the values on the receipts in GnuCash.

  Where I am non-cash donations (goods and services, such as travel and
service time for pro bono assistance to a non-profit group) are deductible
from federal and state income taxes.

  Donating things and time so others can benefit from them can be considered
altruistic and represent good will for individuals and businesses. Last year
I changed my company's structure from Inc to LLC so the distiction between
personal and business is closer with the latter structure.

  To record these non-cash donations requires an expense account, and that
needs to be offset by an asset account. By using these new accounts when I
send her the annual P and balance sheet, along with PDF copies of each
month's bank statements for both business and personal accounts she has all
the information needed to prepare my tax returns. She's moving to do as much
paperless work as possible and it's easier for me to send PDF attachments to
an e-mail than drive two thick wads of paper to her office.

  Does this clarify things for you?

Regards,

Rich
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Re: Recording non-cash donations [RESOLVED]

[Adrien Monteleone]

That was quick, you answered your own question with a recommendation from an 
accountant in 3 minutes. (at least by my clock)

I’m curious for a clarification.

Does your accountant mean to expense the non-cash goods and services provided 
at once?

Or to hold these as deferred and expense them as used?

Or even to accept them as ‘revenue’ and later deduct them against matching 
expenses?

Just curious. Overall, I think I see where she’s going, I just want to 
understand the advice better.

Regards,
Adrien

> On Feb 13, 2018, at 5:09 PM, Rich Shepard  wrote:
> 
> On Tue, 13 Feb 2018, Rich Shepard wrote:
> 
>> For tax purposes non-cash donations of goods and services are deductible.
>> I would like to track those as an account (or off-setting accounts) in
>> gnucash and do not find how best to do this in the guide or help docs. I'm
>> open to suggestions on how to track these transactions.
> 
>  I spoke with my accountant and she approved my solution: and expense
> account for non-cash donations and an asset account 'goodwill.'
> 
>  That'll work.
> 
> Rich
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Recording non-cash donations

[Rich Shepard]

Hi all,

  For tax purposes non-cash donations of goods and services are deductible.
I would like to track those as an account (or off-setting accounts) in
gnucash and do not find how best to do this in the guide or help docs. I'm
open to suggestions on how to track these transactions.

Regards,

Rich
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