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SPECIAL GIFT SITUATIONSestimate of the value of the item auctioned; as a practical matter, relations withdonors and patrons are such that a charity usually cannot be so cavalier.These rules place considerable pressure on charitable organizations. Toreturn to the preceding example, is the charitable organization willing to issue asubstantiation acknowledgment that the auctioned automobile has a value of$20,000, so that the winning bidder can claim a charitable deduction of $5,000? Acharitable organization that knowingly provides a false written substantiation toa donor may be subject to the penalty for aiding and abetting an understatementof tax liability. 356(e) Quid Pro Quo Contribution RulesCongress has required this: When a person makes a payment to a charitable organizationin excess of $75 and receives something of material value in return, thecharitable donee is to make a good faith estimate of the value of the item andnotify the donor that only the difference between the fair market value of the itemand the amount paid for it (if any) is deductible as a charitable contribution. 357The charitable organization is not, however, expected to function as an appraiser.Here, the application of the tax rules in the charity auction context becomeless pellucid. Superficially, the quid pro quo rules would seem to apply in thecharity auction setting when the amount transferred is in excess of $75 and thereis a gift element.A quid pro quo contribution is a payment “made partly as a contribution andpartly in consideration for goods or services provided to the payor by the doneeorganization.” 358 Thus, it can be argued that the purchase of an item at an auction,at a price known to be in excess of the fair market value of the item, is botha contribution and a payment made in consideration of something (a purchase).This law, however, contemplates a transfer that is predominately a contribution,with the purchase or consideration portion being minor.Nonetheless, if the donor and the donee are in harmony, and if the amountpaid at an auction is in excess of $75, the charity can make the necessary disclosure,notifying the donor that the deductible amount is confined to the paymentless the value of the item.(f) Sales Tax RulesAs discussed, every transaction at an auction is, in whole or substantial part, apurchase. Thus, the charity is engaging in sales, which can trigger application ofthe state’s sales tax. This is a state-by-state matter, and thus it is difficult to generalizeon the point, other than to say that the law of the applicable state shouldbe reviewed.A state is likely to exempt charitable organizations from having to pay thestate’s sales tax. This exemption, however, does not mean that the entity is exemptfrom the requirement to collect the sales tax.356 IRC § 6701. See § 10.14.357 IRC § 6115. See § 21.1(b).358 IRC § 6115(b). 316