It is common to find items and experiences at benefit auctions that are marketed as “priceless”. Examples of this include: autographed memorabilia, a private dinner with a celebrity, or the rights to name a local street. These items are considered priceless because they typically aren’t something you can pick-up at your local shopping center.
A question I am often asked is “Do we have to place a value on items even when they are considered priceless?” The answer to that question is absolutely yes. The most important reason for this is for tax purposes. When people buy an item at a benefit auction, they are only able to write off the amount they spend above retail value. For example, Mr. and Mrs. Smith buy a round of golf that has a retail value of $100 and they agree to buy it for $150. Their tax write-off in this case is $50. Therefore, if someone buys an item that is considered “priceless” in order for them to receive a potential tax benefit, they need to know the retail value of that item.
The next question is “How do we know what the retail value is for something so unique?” The answer to that is you should make a good faith estimate of the value of goods or services using “any reasonable methodology”. If selling autographed memorabilia, research what other similar types of memorabilia have sold for. If selling a private dinner with a celebrity, estimate the price per person and factor in a reasonable fee for the celebrity’s time. The goal is to make sure you assign a value and be able to justify your figure.
The final question is “Do we have to tell people what we valued a priceless item at?” My answer to that is no. First, you do not legally have to disclose any retail values during a live or silent auction. You only have to disclose the retail value on their receipt. I strongly encourage clients to never disclose any retail values unless it is the face value of a gift certificate.
Go ahead and advertise those items in programs, on your website, and in other marketing pieces as “priceless”. To many people they really are priceless. Just make sure you do have a price because the only person that number really matters to is Uncle Sam and we always want to make sure we stay in his good graces.