Philanthropy Column


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 Philanthropy 
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Beware Charity Fraud

The Federal Trade Commission (FTC) recently sent me some information about some popular charity frauds going around lately.

I personally never respond to a solicitation. It could’ve come in the mail, through a phone call, or an email; I ignore them all. It’s not because I’m a heartless person and it’s not because I don’t trust the solicitation, it’s that I prefer to go directly to the charity. I don’t want to write a personal check and put it in the mail. I don’t want to give any sensitive information across the phone and I certainly don’t trust email, with all the scams and phishing attempts surrounding those. I know the charities we like to support and we generally go directly to their websites to donate.

However, given the tumble the stock market had over the last year, a lot of charities are turning to solicitations to get more donations because their trusts and endowments are hurting. This has opened up an opportunity for scammers and thieves, so the FTC has offered up some good information to help you combat that.

If you recently received a phone call from a “charity” and are considering donating money, I recommend you read the FTC’s Charity Fraud website for tips on how you can protect yourself and the people you’re helping. When you give money to a scammer, it only empowers them to keep on ripping people off. As more people get burned, they start avoiding charities and charities that support the people the scammer said he or she was collecting for. In the end, it’s the people you intended to help that get hurt the most.

I also wanted to spotlight two particularly poignant scams going on right now and how to protect them. The first involves scammers pretending to collect donations to support the troops, as in vets, active duty, or their families. The second is the result of an enforcement sweep of scammers that pretended to collect donations for police, firefighters, and veterans.

It’s great to help those who are in need, but not if the money is going into the pocket of a scammer.

 Philanthropy 
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Appreciate What You Have, Make The World Better

Watch this very eye-opening video about wealth, the world, and how much we should all appreciate what we have produced by The Miniature Earth project.

18 struggle to live on US$ 1.00 per day or less…
53 struggle to live on US$ 2.00 per day or less…

(you can watch a larger version directly from the site itself)

 Philanthropy 
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How to Value Your Clothing Donation

Goodwill Collection BoxEvery year, my wife and I go through all of our clothes and pick out the stuff that we haven’t worn in the last year. You know what these are, the polo shirt that has been in the back of the closet since two years ago, the button down that no longer feels right, the sweater that’s ugly but old enough that your aunt forgot she gave it to you… we throw all that stuff into boxes or bags and send them over to our local Goodwill for a sweet sweet tax deduction. We’ve only been able to do this the last three years, since buying a house, because you can only deduct those donations if you itemize your taxes. I think philanthropic donations should be deductible even if you itemize but those are the rules.

Donating “stuff,” be it your car, your clothes, or something else, was one of the ten year end tax saving tips and you still have time to do it. Even if you don’t itemize, consider doing it just so you can clear yourself of some clutter. Your donations let Goodwill or the Salvation Army earn extra money to fund their operations and it provides affordable items for purchase from their customers.

The trickiest part about the entire process is how do you assign a value to the items you’re donating? Chances are the IRS will never come knocking on your door and asking how you valued your clothing because it’s simply not going to be a lot of money involved. However, this doesn’t mean that you can shirk on documenting because if they do show up and you don’t have records, they may invalidate the donation and you could find yourself paying interest and fees!

How To Donate & Document Donated Clothes

  • Gather up everything and create a list of items: Simply create a list of all your items and include as much information as possible. Anything you want to donate has to be in “good” condition or better. You can put the brand and type of clothing (Stafford button down, American Eagle polo, Gap jeans, Ann Taylor sweater), its condition, the estimated purchase price and date (if you can remember), and the fair market value at the time of donation. The more information you have down, the better. If you think anything you list sounds unbelievable, take a picture (the IRS may not believe you’re donating a $200 suit in good condition, for example)
  • Rememebr to get a receipt: Whenever we go to the nearby Salvation Army, we just give the bag(s) to the person working the bench, he or she tosses it in a huge pile, and then they hand us a pre-signed blank receipt. Some places won’t give you a receipt for small donations but I would always get one and fill it out with as much information as can fit, then just refer to another page. Some people recommend putting something vague (because you have better records) but I put a listing (3 shirts, 2 pants, loafers, etc) of actual items and then refer to another document with specifics.
  • Worth more than $500? If you donate more than $500 of clothing, then you’ll need to fill out Section A of Form 8283 Non Cash Charitable Contributions. Don’t let the form scare you, you won’t need an appraisal unless you donate more than $5,000 – which is a lot of used clothing.
  • Claiming the deduction: Last step is to remember to claim the deduction on your tax return! You’ll always list it on Schedule A of the 1040 but if you do your taxes with a software product (highly recommended), they’ll just ask you as you fill it out. They may even offer guidance on valuation.

Determining Clothing Fair Market Value

And… here’s the tricky part. By definition, the fair market value is the reasonable price that a regular person would pay for that item. Imagine if you saw that item at a garage sale or a used goods market, how much would you pay for it? That’s the fair market value… you see how ambiguous it is?

Fortunately, there are plenty of resources available to help you determine how much your stuff is worth. The Salvation Army has a valuation guide for everything from clothing to appliances, children’s items to furniture. It’s pretty comprehensive and includes a range so you can decide, based on condition, how much it’s worth. Goodwill has a similar valuation guide in PDF form.

Finally, if you’re an IRS publication junkie, you can always check out Publication 561, Determining the Value of Donated Property, and Publication 526, Charitable Contributions, for more specifics, scenarios, and other useful tidbits boringly explained.

However you value your old stuff, remember that donating it in the first place is more important than not donating because you aren’t sure how to handle the deduction. In the end, it won’t save you a ton of money regardless and it’ll make life easier for some charities and perhaps some individuals.

(Photo: roadsidepictures)

 Philanthropy 
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Fight Poverty: Donate to Food Banks

Today, October 15th, 2008, is Blog Action Day. It’s a day when over 2,000 bloggers, myself included, will direct the conversation towards a subject that needs greater attention – poverty.

Here in the United States, there is defined “poverty line” (also known as a poverty threshold) published by the Census Bureau for statistical purposes and the Department of Health and Human Services for administrative purposes. That poverty line is used for a variety of benefit calculations and for 2008 it’s set at $10,400 for an individual in the 48 contiguous states. $10,400… that’s it. That’s $866.67 a month.

The federal minimum wage is currently set at $6.55 an hour (effective July 27th, 2008; though increasing to $7.25 an hour July 24th, 2009). If you take a “standard” 2,000 hour work-year (though most work far more to subsist), that’s $13,100 – or a mere $2700 above the poverty line.

In a world where CEOs get hundreds of millions of dollars, can’t we as a society do something about it?

Don’t worry. This isn’t a post about hating CEOs, celebrities, athletes or anyone else who succeeds, public record has shown that many are doing a tremendous amount in terms of giving back. What I’m mean is that we should do more to help our fellow American. Consider donating to your local food bank. With Thanksgiving on the horizon and the holidays coming up, food banks will be under a tremendous amount of strain and they need our help.

The $10 you thought about donating to Barack Obama or John McCain’s presidential campaign? Send that to your local food bank, it will directly impact several lives in your community. The $50 you wanted to send to the American Cancer Society? Consider a food bank or soup kitchen. You aren’t worried about cancer if you don’t know where your next meal will come from. I know the recent financial turmoil has probably made you reconsider your charitable contributions this year, that’s perfectly normal. You are not alone. However, you don’t have to donate $100 or $50 or even $10 to make an impact.

$5 can go a very long way.

Find a local food bank.
Feeding America

 Philanthropy 
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Fidelity Charitable Gift Fund

Earlier this year I discussed how I was going to follow Flexo’s lead and open up a Fidelity Charitable Gift Fund. The idea behind the Fidelity Charitable Gift Fund is that you can make a charitable donation now, have the assets appreciate, and then decide where donations will go later on. Much like how a mutual fund is actually an organization, the Fidelity Charitable Gift Fund is an organization. When you donate money, you are donating to the Fidelity Charitable Gift Fund and you have two options as to where the money goes. You can either open up a Giving Account under your name (or any name you wish) or open up a Pooled Income Fund.

Giving Account

This is the type of account Flexo talked about and one that I was seriously considering. What you do is open a Giving Account, contribute funds, direct how the funds are to be invested, and then recommend grants. You will notice that all the documents say that you will “recommend” which organizations will be the beneficiary of your funds, but they aren’t legally bound to honor your wishes. I think that specific language is used for legal purposes but they honor most recommendations.

Pooled Income Fund

This is the second option and one I hadn’t considered. It’s part charitable fund and half income generation, akin to an annuity, though the final payout goes to a charitable organization (up to 10). So let’s say you contribute $10,000. You direct where the contributions will be invested and you can select up to two beneficiaries. Each quarter, the proceeds from your investments will be paid out to the beneficiaries. Upon the death of the final beneficiary, the value of the account goes towards charities. It’s different than the Giving Account and less desirable for what I’d like to accomplish.

Considerations

So, it sounds pretty easy right? Why wouldn’t everyone do this? (these concerns cover only the Giving Account)

  • Initial limits and fees: The initial contribution has to be greater than $5,000 and each additional contribute has to be greater than $1,000. The fees include the expenses of the investments plus an Annual Administrative Fee. The administrative fee is the greater of 0.60% of the total fund value or $100 for the first half million, 0.3% for the second half million, 0.2% for the next million and a half, and 0.15% for the rest up to five million. Beyond that and the fees are different. If you were to contribute $5,000, you’d be talking an administrative fee of 2% plus the underlying investment fees. If you don’t have $5,000 or you don’t want to pay any of these fees, you might want to just donate directly to a charity.
  • Time horizon: Since you do select investments for your contributions, there is the potential that your investments will lose value. So, if you plan on doing this, contribute funds you think you might want to use next year or the year after (or, ideally, in five years). Increasing the time horizon will smooth out the random walk of the stock market.
  • Tax benefit: As much fun as it would be to have the Jim Charitable Trust, the tax benefits are better if you contribute appreciated stock. When you donate appreciated stock that you’ve held for over a year, you can deduct the entire value of the stock from your income, including the appreciation. (For more on that, read this article about reducing your capital gains by donating stock) With the Giving Account, you deduct your initial contribution and not the amount actually granted, so you never actually benefit from the appreciation (but you can donate appreciated stock).
  • Grant exclusions: Almost any recommendation you give will be accepted with the exception of several groups, though there are very good reasons. For example, you cannot recommend any donation that would result in you receiving any sort of gift or preferential treatment. The list is available here.

I’ll be honest, the idea of opening a small charitable gift fund in our name does sound like fun and it would be great to be able to leverage the market to help further our philanthropic goals but with a $5,000 start price and those annual fees, I may wait a little while before opening one up. The uncertainty of the market (and a short time horizon) are also serious considerations as well… what do you all think? Good idea? Bad idea? Wait? Go now? :)

 Philanthropy 
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One Laptop Per Child Offer

Between November 12th and November 26th, the One Laptop Per Child is running a Buy One Get One program in the US and Canada. Buy one laptop at $399 (+$24.95 shipping) and not only will you get one of these slick little meanie greenies but you’ll also be sending one to a child in a developing nation. Of the $399, $200 will be tax-deductible so it’s really less than $399. To make the whole deal even sweeter, T-Mobile will give all U.S. donors a year’s complimentary access to their HotSpots (worth about $350/yr according to T-Mobile). [full terms & conditions of B1G1 program]

Let me back it up a little bit for those unfamiliar with the OLPC and the XO Laptop. Back in 2002, MIT professor Nicholas Negroponte went on a mission to produce the $100 laptop. The purpose was to provide cheap technology to the children of developing nations in an effort to raise them up. The XO laptop was created out of that vision and while not quite $100, it’s very close ($200!). For more about the OLPC, you can visit laptop.org.

The specs on this little laptop are pretty good for a $200 unit and I signed up to get one (and give one), if only to say I was involved in something that I think is very noble. While it’s not towards curing cancer or granting a wish, it’s certainly going to change people’s lives and I hope this thing explodes. Will you help?

 Philanthropy 
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2007 Summer Ghent Bar Tour – Let’s Raise Some Wishes!

Are you in the Norfolk, VA area? Do you like to make wishes come true? Well it’s the summer and my buddy Scott is running his Ghent Bar Tour once again for the Make A Wish Foundation. If you’ll remember, the winter bar tour a few months ago raised a staggering $14,000 (crushing the goal of $8k) to help Ashtin and Bradin. Ashtin got his wish of a safe room so his parents wouldn’t worry about him and Bradin was able to go see Spongebob Squarepants, a remarkable achievement. This year, the bar tour will be taking place on July 28th and tickets only $15 now (if you buy before June 30th) and only $25 the day of – remember its going to a great cause. (Use Google Checkout if you register online, it won’t charge them a fee)

FMF of Free Money Finance and I are teaming together to try to raise some cash for the cause, we’ve both agreed to match donations up to $500 each. So if readers of Free Money Finance and Blueprint can come up with a thousand dollars of donations to the Make A Wish Foundation, we’ll get together and contribute a thousand dollars – making the total donation worth two thousand dollars. Any donation of any amount is appreciated!

Some details on the donations, they are made directly to the Make A Wish Foundation and entirely tax deductible (check with your tax professional), but we ask that you mail them to Scott so he can collect it all in a package to present to the foundation. Please email me (jim at bargaineering dot com) if you’d like to donate and thank you!

And, I’m going to attend the tour, so if you are going then shoot me an email too!

 Investing, Philanthropy 
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Donate Odd Lots of Stock

Dong left a great idea on my post yesterday about donating stock to charity:

I did this earlier this year. Didn’t cost a thing via E*Trade. I imagine it’s true of other brokerages. It’s a great way getting rid of odd lots. I did this with a bunch spinoff shares that would’ve been expensive to sell.

Back when I owned shares of H.J. Heinz Corporation (whenever I’ve worked at a company, its shares have always gone up while I was there), they sold a portion of their business to Del Monte Foods and thus part of their stock was split into shares of Del Monte. Well, when you have like fifteen shares of a DLM, it’s only worth about $150 – the transaction fees of selling the shares would make it cost prohibitive. Eventually I did end up selling the shares but had I known what I know now, I likely would’ve donated them and saved myself some in taxes.

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