Services: are they receiptable?
(Charities cover page)
This video will explain what are gifts of service and will cover examples on why they are not receiptable.
What is a gift?
A gift is a donation that is freely or voluntarily given. If a donation is made because of an obligation, it is not a gift. Simply making a donation to a charity or other qualified donee is not enough for a donation receipt to be issued.
You also must decide if the donation involves a transfer of property. Gifts of property include cash or non-cash gifts like equipment, food, stocks and bonds, and so on.
Gifts of service are donated time, skills, and effort. They are not a transfer of property.
Therefore; donation receipts cannot be issued for donations of gifts of service.
Although they are valuable to a charity, donations of time, skill and effort, are not considered a transfer of property. Although I may freely volunteer my time, skill and effort, as an accountant to do your financial statements, you have not received any property.
Let’s take a look at various scenarios to help make sense of how to handle gifts of service.
Tonya, a professional freelance journalist, offers to write several articles to support a fundraising campaign for your charity.
Her services are worth $500, but Tonya offers to accept an official donation receipt instead of a payment to help keep your charity’s expenses down.
Q1: Can you issue an official donation receipt to Tonya?
A1: No. You cannot issue an official donation receipt because Tonya is donating her time, skills and effort, which are not property.
You need to build more shelves for bulk items in the food bank. You hire Joe’s Carpentry Company to build the shelving at a cost of $500.
To help your charity, Joe’s Carpentry Company wants to donate the building material worth $200 and charge only for the labour, which is worth $300.
Q2: Can you issue an official donation receipt for this kind of donation?
A2: Yes, you can issue an official donation receipt for the building materials because it is a transfer of property. However, you have to determine the fair market value of the building materials.
After having paid Joe’s Carpentry Company for its services, you receive a $300 cheque from the company in the mail. The $300 donation is the same amount you paid Joe’s Carpentry Company for its services.
Q3: Can you issue a receipt for this donation?
A3: Yes. You can issue Joe’s Carpentry Company an official donation receipt for the cash donation of $300. This cash donation is considered property which was given voluntarily by the company in a transaction separate from the carpentry services it provided.
This is commonly called “exchange of cheques.”
You cannot issue receipts for gifts of services. There are no exceptions. Circumstances where donation receipts can be issued for donations of property such as cash and non-cash gifts are explained more fully in our video, “Gifting and receipting 101.”
If you pay a service provider for services rendered and the service provider then freely donates the money back to you, and both of these are separate transactions in your books and records, then you can issue a receipt for the cash donation.
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