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§ 9.13 CHARITY AUCTIONSThe substantiation rules apply with respect to gifts made in the context ofacquiring an item auctioned by a charitable organization, assuming the gift elementis $250 or more. 352(d) Substantiation RulesThe position of the IRS on charity auctions can be found in rulings as far back as1967. 353 There is little question, however, that charitable organizations and theirdonors have not, over the intervening years, understood the IRS’s stance, whichhas been clear and sensible. Consequently, Congress believed it had to enact legislationin this area and, in 1993, it did.At this point in the analysis, it is necessary to place the subject in context.Can it honestly be said that an individual who attends an auction sponsored bya charitable organization is there for the purpose of making a gift? Obviously,someone who wants to contribute to the charitable organization can do so withoutattending the charity’s auction. Individuals participate in the auction to helpsupport the charitable organization and to purchase items.The statutory substantiation rule is this: To be able to deduct the gift, a donorwho makes a separate charitable contribution of $250 or more in a year mustobtain the requisite written substantiation from the donee charitable organization.354 This substantiation must be an acknowledgment of the gift and must containthe following information: (1) the amount of money and a description (butnot value) of any property other than money that was distributed; (2) whether thedonee organization provided any goods or services in consideration, in whole orin part, for any money or property contributed; and (3) a description and goodfaith estimate of the value of any goods or services so provided. 355Clearly, these rules are applicable with respect to gifts of items to be auctioned(assuming a charitable contribution deduction is available or desired).Also, as far as acquisition of an item at a charity auction is concerned, if there isno gift element, it is clear that the rules do not apply.However, when the patron at a charity auction is of the view that he or shehas made a charitable contribution in the course of acquiring an item, the ostensiblegift element is $250 or more, and a charitable deduction is desired, the rulescome into play. The donor must notify the charitable organization that he or shebelieves a gift was made at the auction, with the intent of receiving the necessaryacknowledgment. If the charity agrees that a gift was made, it issues a writtensubstantiation showing the amount that was “contributed” (here, the fullamount of the winning bid) and a description and good faith estimate of thevalue of the item acquired. The difference, then, would be the amount deductibleas a charitable gift.The process would not function quite so smoothly if the charitable organizationbelieved that no part of the payment was a charitable gift. Certainly, it couldrefuse to issue the acknowledgment or refuse to commit itself to a good faith352 See § 9.13(d).353 See § 21.1(a).354 IRC § 170(f)(8). See § 21.1(b).355 IRC § 170(f)(8)(B). 315