Contents

FUNDAMENTAL CONCEPTSbusiness to designate a charitable organization as the recipient of a contributionfrom the corporate employer. The contribution subsequently made by the corporationwas an amount equal to the sum of the contributions that the employeesmade to the corporation’s political action committee during the previous year. 86In a further illustration of this point, two courts denied contribution statusto payments to the United States Olympic Team (a charitable organization),made by parents of a figure skater while accompanying her to various internationalcompetitions, because the payors were “motivated primarily by concernfor their daughter rather than by an interest in the Olympic Team in general.” 87The appellate court said that “a contribution may not be deducted where theexpectation of personal benefit is the primary motive.” 88One of the best-publicized of these issues was the tax consequences for contributionsmade in the context of athletic scholarship programs. Although thespecific rule in this connection was ultimately provided by Congress, 89 IRSguidelines published in 1986 (which were superseded by the statutory provision),well illustrate the general principle.The athletic scholarship program that troubled the IRS can be described generallyas follows. An individual pays $300 to an athletic scholarship programmaintained by a tax-exempt university, thereby becoming a “member” of theprogram. The only benefit accorded members is that they are permitted to purchase,for $120, a season ticket to the university’s home football games in a designatedarea in the stadium. Because the games are regularly sold out well inadvance, tickets to the games covered by the season ticket would not have beenreadily available to the “donor” if the “donor” had not made the payment. The$300 membership fee is paid annually and a separate payment is required foreach season ticket. The university did not inform its “donors” of the fair marketvalue of the right to purchase a season ticket in the designated area.The IRS held that under these circumstances, the right to purchase the seasonticket was a “substantial benefit.” 90 Because this substantial benefit wasafforded the “donor” because of payment of the membership fee, the IRS heldthat a presumption arose that the $300 reflected the value of the benefit received;thus, there was no charitable deduction for the payment. The IRS noted that,assuming the same facts except that the individual paid $500, the “donor” madea charitable gift of $200.86 In a somewhat mysterious application of this principle, the IRS ruled that contributions by certain graduatesof a college or university to an historical preservation society would not be deductible by the donors, wherethe funds donated would be used to preserve the historically valuable characteristics of a building housing afraternity of which the prospective donors were members (alumni), because of their “personal interest” in thefraternity. Priv. Ltr. Rul. 9119011.87 Babilonia v. Commissioner, 681 F.2d 678, 679 (9th Cir. 1982), aff’g 40 T.C.M. (CCH) 485 (1980).88 Id., 681 F.2d at 679.89 IRC § 170(l). Pursuant to this rule, if a person makes an otherwise deductible payment to or for the benefit ofa college or university, and in exchange receives the right to purchase tickets for seating at an athletic event inthe institution’s athletic stadium, 80 percent of the payment for the right to buy the tickets is treated as a deductiblecharitable contribution. This rule applies when the right to purchase tickets is for seating in a suite,skybox, or other special viewing area; the limitations of the rules pertaining to the deductibility of skybox tickets(IRC § 274(1)(2)) are inapplicable. IRC § 274(f); Tech. Adv. Mem. 200004001.90 Rev. Rul. 86-63, 1986-1 C.B. 88, 89. 70