Donating wine- how to calculate tax deduction?

WINE TALK
21

Talk to your tax advisor but I think the actual rule is FMV but no more than cost.

22

My tax advisor said to stop buying so much sh1tty wine.

23

Seems like good advice. What kinda of wine are you buying that do down in value?

24

I got all this Bordeaux I bought about 10 years ago - I’m sure it’s gone bad by now.

25

I’d guess that outside of a handful of wines, most wines are “worth” less than their cost, especially in the short to medium term. The market for most wines is thin, and the friction quite high.

And when I say “handful” I mean the obvious candidates - high end Bordeaux, Burgundy, Champagne, Rhône’s, Barolo, cult Cali’s etc. But that’s a tiny, tiny fraction of the wine out there.

I think if most of us had to liquidate our collection in a short time frame we’d take a bath. That to me implies the wines are worth less than their cost.

26

Indeed. I’m going to be donating a “Goopy High Scoring Australian Shiraz from the early 2000s” tasting the next time around.

Joking aside, it would be a good reason not to pick appreciated wines for donations and donated tasting events. Yet another market-distorting behavior encouraged by the tax code, such as elderly people hanging onto appreciated stocks and real estate to their deaths, so they can get a stepped up basis through inheritance.

27

???

28

Can anyone respond on these two good questions from the original post, particularly #3?

Do you need to produce actual purchase receipts for the donated bottles, or is it enough to have evidence of what the bottle would have cost at the time it was purchased?

29
  1. Yes shipping is part of cost, as is cost of any storage. I also deduct the cost of professional wine memberships, publications and charitable donations against capital gains.
  2. Actual sales receipts are best of course. Anything else according to your accountant’s appetite for risk.

Overall, you are better off selling your wines at market, and donating the proceeds.

30

Wine is a law unto itself; on paper I can donate the full market value to the charity, who would in turn buy the wines from me at that cost. But, because I cannot legally sell wine to that charity, I am stuck.

31

This is the relevant IRS publication.

It says you use fair market value for a good like wine that has decreased in value. Wines that may have increased in value have a more complicated rule set I’m not going to summarize. 526 defines “fair market value” as “…the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.”

32

If anybody is looking to donate wine, I’m on the Board of a charity, Blessons for Women (www.blessons.org), and we’re always looking for wine in our charity auctions and events, particularly if the wine is from a woman-owned winery or the winemaker is female. Just sayin’.
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33

This is exactly correct. That is why someone needs to create a “charity” whose charitable purpose is to teach the underprivileged to enjoy and appreciate fine wine that is donated by collectors for such purpose.