hunter_le five
Sheriff Underscore
Holy crap, a HBT accounting thread. Neat. 
Bean counters unite!
Carry on....
Bean counters unite!Carry on....
Tax Write Offs?
- Thread starter NedStackey
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Holy crap, a HBT accounting thread. Neat.
Carry on....
Full of mis-information, half truths, and flat out fraud.....
So, yes, an accounting thread.
That's a real dandy! At least they cut a deal with the IRS, an agreement, which sets the heirs free from any (tax) liability whatsoever, including possible criminal charges. Speaking of a classy barter there... I'm sure the attorneys weren't free.
So am I correct to understand there IS more value to the content of that keg than the sum of ingredients, although it's illegal to sell it?
Then how much would that be? 40 pints x $5-7 (average craft beer, pint price) = $200-280?
kristiismean
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I am not a lawyer or CPA
If you donated to a Non profit beer that you made at your home, you should be able to write off the ingredients cost.
however, I cannot image that it's going to get you back so many dollars, or save you that many dollars on your taxes, why take the chance?
IslandLizard, $250 sounds like a reasonable number to me.
If you donated to a Non profit beer that you made at your home, you should be able to write off the ingredients cost.
however, I cannot image that it's going to get you back so many dollars, or save you that many dollars on your taxes, why take the chance?
IslandLizard, $250 sounds like a reasonable number to me.
HoppyDaze
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CPA here...I just want to let you guys know I'm billing all of you an hour for having to read this garbage.
azazel1024
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I'd probably consider fair market value at the going rate of retail beer. For example, if you donated a full keg, what is the typical fair market value of a keg of beer at your local distributor?
I'd base it on that. So if a keg is $200 at your local distributor, that is what I'd use. If you donated 144 bottles, I'd base it off FMV of what a mid grade beer would be (say $1.25 a bottle).
Unless the IRS thinks you are trying to cheat them, the most they'll do is disallow the deduction and you might owe interest on disallowed deduction if you are audited in future years.
That would of course stink, but there is probably a reasonable chance they might be fine with it.
The one thing to keep in mind is make absolutely sure you aren't breaking any state laws or federal laws there with amounts of donation/production. I assume you aren't donating 20 barrels of beer or anything like that, but things can get tricky fast with beer and no brewers license.
I'd base it on that. So if a keg is $200 at your local distributor, that is what I'd use. If you donated 144 bottles, I'd base it off FMV of what a mid grade beer would be (say $1.25 a bottle).
Unless the IRS thinks you are trying to cheat them, the most they'll do is disallow the deduction and you might owe interest on disallowed deduction if you are audited in future years.
That would of course stink, but there is probably a reasonable chance they might be fine with it.
The one thing to keep in mind is make absolutely sure you aren't breaking any state laws or federal laws there with amounts of donation/production. I assume you aren't donating 20 barrels of beer or anything like that, but things can get tricky fast with beer and no brewers license.
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But the issue is there is no fair market value for homebrew since it cannot legally be sold or bartered with...
mbbransc
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Another CPA here. Just wanted to chime in since mostly only chemists and engineers get the glory on these boards!
There are different ways to determine fair value. There is no means to calculate the fair value based on price since money is not exchanged. However, you can determine fair value based on the cost of your homebrew given plus a reasonable markup for the time spend producing the beer.
motobrewer
I'm no atheist scientist, but...
azazel1024
Well-Known Member
FMV maybe, but it still has intrinsic value. At a minimum it is worth the raw ingredient cost. Part of the point though is, unless it is illegal to donate it (and it is not illegal to give it away, so long as the person's receiving it are 21 or older), you should still be legally allowed to right off a value of it.
There might be something arcane in the tax code that says that isn't the case, but absolutely nothing in the bog standard instructions for the 8283 indicate you wouldn't be able to.
This really pertains to @Phunhog who posed the question, alas by hijacking this dormant thread.
I'd say deducting the cost of ingredients is reasonable, even the mileage to drive it up there and back, no-one, including the IRS, should question that. Deduct much more than that, it may raise flags and could cost you ultimately if audited and you cannot document your deduction(s) and what not.
How it is declared may make a difference, maybe nothing unusual.
Donations:
$35...
$25...
$75 to Charming Charity 3/25/14
$10...
vs.
Donations:
$35...
$25...
$250 to Charming Charity 3/25/14
$10...
The topic is just interesting.
So how about that keg...
Yeah, for fun, with friends or other homebrewers, here's a keg, and another one, drink as much as you want, let me know what you think. We'll talk beer or something else, having a great time. I'll have some of theirs too.
I'm sure more than just a few of us have been asked to donate a keg to some charity event. Don't know about you guys, I feel a little weird about that, mostly in regards to the time (and timing) involved to provide a keg with good beer. I'd rather give them $25 and call it done. Now if we can actually take the $200-250 deduction things may look different.
What's in it for the Hippo? (Loved that movie).
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Yeah, I agree...
raw ingredient cost is one thing. Using the retail cost of a keg of pliny to use as write-off cost for my dontated homebrewed IPA is another...
HoppyDaze
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moto actually said something kind of funny...he's growing up so fast!
azazel1024
Well-Known Member
That is why at most I'd look at what the lower end retail value is for a keg of beer and use that. At most. I might argue my beer is as good as a keg of pliny (okay, it isn't, but sure, let's say it is), but the IRS may not argue if you argued "$180" and that was the cost of a keg of natty or something. If you said $300 and only a couple of kegs from the local distributor ran to that, they'd probably disallow it in a heart beat.
You almost certainly wouldn't get in trouble for using raw ingredient cost and also possibly milage (because you have to deliver the keg, "set it up" and then take it back or whatever).
There is a subtle but distinct difference between a charitable contribution and a write-off. A "charitable donation" needs to be made to a qualified charitable entity. A "write off" can be listed under advertising or promotions, but isn't "charitable" in that sense of the tax law.
A person cannot "write off" directly on his or her individual 1040, but could via a Schedule C, for example under advertising expenses, if he or she conducts business activity (from their own business). At least that's the way I was taught and understand it.
So if treated as a "write-off" (not donated to a charitable entity), I wonder where that claimed expense is coming from, as no home brewer is allowed to sell a keg of beer, or conduct a business as such. Is the price $0 again?
jspain3
Well-Known Member
Yet another CPA (and Engineer) here. At least for income purposes, the IRS doesn't care about the legality of a transaction. You could be a kingpin drug dealer running afoul of the law, but you'd better report all of your illicit activity's income.
IMHO, it's the same with a non-cash donation. Whether you can legally sell home brew or not, it has a FMV.
Going forward, here's what I'd do:
- Start the brewing process as normal.
- Have a contact from the charity come over to your house.
- Present him/her with 2 separate donations: boiled wort and yeast. Get a receipt. (technically it isn't beer, yet)
- Before he/she leaves, help them load the donations into a fermenter of your choice. If they are in a hurry, tell them they can return in 3-4 weeks and you'll gladly store it until their return.
- File taxes.
Thanks for explaining the difference. What I am talking about are "charitable donations". For example a few weekends ago I donated 15 gallons of beer to a local charity film festival. They sold the beer at 5 dollars a glass and made roughly 750 dollars. This is completely legal in California as of two years ago. So now when I go get my taxes done I claim the expenses of making that beer as a "charitable donation". I always assumed there was no FMV since of course I can't legally sell it. Now I am not so sure.
I'm not sure where it stands. Just trying to get a grip on it myself, voicing some ideas and hope to get valuable feedback from people who could know. There's a lot of interpretation. Did you read the Bald Eagle case cited earlier?
To me it looks like you donated $750 worth to that charity. That's the money they realized from your donation, so that's what it's worth. The question arises, if that $750 deduction is allowed under the tax law?
For comparison, we're attending an "Empty Bowls" fundraiser tomorrow and the soup is donated by several good restaurants in that area. I'm willing to bet these restaurants take a deduction that is way more than their cost of carrots, tomatoes, beans, and chicken. I'm even willing to bet their deduction is xx bowls @ $6.50-9.50 a bowl (retail price). That's why they can and want to do it, as well as being charitable and have a royal heart.
HoppyDaze
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No wonder the IRS is so busy.
TopherM
Well-Known Member
My homebrew club does 4-5 charity events a year, including one of our own. Most of these charities claim to have done the research and say the same thing, that the homebrewers can write off the retail price of their raw ingredients.
So, we're talking about about $80-100 a year for me personally in raw ingredients donated to these guys. I'm in about a 25% tax bracket.
I don't know how well acquainted you are with the IRS's infinite potential to catastrophically f**k your entire life, but I'd rather not push it over $20-25 in tax savings unless I'm 100% sure on the code.
Side note, there is no one, living or dead, that has ever been 100% sure on the U.S. tax code. If they say they are, run. It is quite possibly the most complicated document ever written by mankind, and that's not an exaggeration.
When in doubt, leave it out!
So, we're talking about about $80-100 a year for me personally in raw ingredients donated to these guys. I'm in about a 25% tax bracket.
I don't know how well acquainted you are with the IRS's infinite potential to catastrophically f**k your entire life, but I'd rather not push it over $20-25 in tax savings unless I'm 100% sure on the code.
Side note, there is no one, living or dead, that has ever been 100% sure on the U.S. tax code. If they say they are, run. It is quite possibly the most complicated document ever written by mankind, and that's not an exaggeration.
When in doubt, leave it out!
HoppyDaze
Well-Known Member
Don't let the IRS scare you like that. If you have a legitimate claim to something document your research and the worst that will happen is they will disagree and you'll have to pay the tax. Assuming it's not intentionally fraudulent. Half the people in these threads arguing about what can and can't be "written off" don't even itemize so it wouldn't matter anyway. IRS will not f**k your life...if you think that then the odds are you did something very, very stupid or lazy.
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Yeah, I know a few people that should've been f**ked for life by the IRS based on what they did. But, they end up settling with the IRS for a lot less...as mentioned, the whole code is a mess...
