The following was a recent question we received via e-mail and we want to share the common situation with you.
Introduction: Contributions may be the most gracious form of expression that a donor can provide a church/ministry to aid in its vision. Yet, with gracious offerings can come many challenges when attempting to account for the funds. Most ministries solicit contributions through a variety of avenues each offering it’s own set of challenges in how the revenues and expenditures should be treated.
The following example is a scenario that many ministries and churches encounter:
A donor purchased an event ticket in advance with the understanding (clearly printed on the ticket) that a portion of the ticket price was a charitable contribution to the church, and the remaining portion of the ticket price was for value received, a meal (therefore not tax-deductible). The ticket price was $125 — $100 charitable gift, $25 value of event. ($25 per person was the church's cost to hold the event.)
The purchase of the ticket by that individual was recorded by the church accordingly- a portion as a charitable contribution and a portion as not tax-deductible.
Later, the individual was not able to attend the event, and did not request a refund of their ticket purchase.
The church relied on and used $25 of the ticket price to pay for the costs of the event.
How should the $25 be treated? Since the donor didn’t show up, is this a contribution?
What if the cost of the meal is $25 and the church/ministry spends an additional $10 per person in advertising the event?
Is this a $125, $100, or $90 contribution? See post #2 for the answer.
