Donating overstocks could net a tax deduction

If the buddleias didn’t budge and hanging onto them another year is out of the question, consider donating them.

The National Association for the Exchange of Industrial Resources (NAEIR) is touting the benefits of donations. NAEIR accepts new, overstock merchandise and provides the proper tax documentation. Donations are redistributed to more than 13,000 qualified schools and nonprofit organizations nationwide.

“By donating that nonmoving merchandise to charity, your company can earn a federal income tax deduction under Section 170 (e)(3) of the U.S. Internal Revenue Code,” said Emily Collins, NAEIR spokeswoman. “The IRS code says that regular (C) corporations may deduct the cost of the inventory donated, plus half the difference between cost and fair market value. Deductions may be up to twice cost.”

S corporations, partnerships and sole proprietorships qualify for a straight cost deduction, she said.

Under IRS regulations, donated merchandise may not be bartered, traded or sold. Charities or schools may not auction or sell donated merchandise to raise cash, she said. Donors send NAEIR a written proposal or list of product to be donated, including a short description, quantities and a value. NAEIR has a committee that reviews and approves proposals within 72 hours.

NAEIR notifies the donor and then sends shipping instructions and labels. Although the donor company is responsible for the shipping cost, it is also tax deductible. NAEIR’s Traffic Department can provide reduced shipping rates.

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For more: National Association for the Exchange of Industrial Resources, (800) 562-0955; www.naeir.org.

August 2008