[terry]

Can someone explain to me how the IRS allows any portion of the money that MUST be paid, and is publicly documented as required, in order to receive a particular product to be considered tax deductible at any non-zero rate?  Especially if that "donation" requirement is seemingly widespread in the industry and not a trivial amount.

Why doesn't the state consider this part of the purchase price and tax it accordingly?  For that matter, why doesn't the state or federal attorney general's office consider this practice to be a conspiracy to avoid taxes.

The IRS allows a deduction because Congress passed a law saying that 80% of this type of donation is deductible.

Section 170(l) of the Internal Revenue Code deals with precisely this issue. That subsection says that when somebody donates money to a college or university, and the donor receives "the right to purchase tickets for seating at an athletic event in an athletic stadium of such institution," and the donation otherwise would be a fully deductible charitable donation, then the donor is allowed to deduct 80% of the total amount.

Congress apparently made the somewhat arbitrary decision that 20% of the donation is deemed to have been given in exchange for the right to buy tickets, and therefore is not really a gift. The advantages of the 80/20 rule are that it's easy to apply and it avoids the difficult question of trying to put a fair market value on the right to buy tickets for various sports at various universities.

[terry]

Can someone explain to me how the IRS allows any portion of the money that MUST be paid, and is publicly documented as required, in order to receive a particular product to be considered tax deductible at any non-zero rate?  Especially if that "donation" requirement is seemingly widespread in the industry and not a trivial amount.

Why doesn't the state consider this part of the purchase price and tax it accordingly?  For that matter, why doesn't the state or federal attorney general's office consider this practice to be a conspiracy to avoid taxes.

The IRS allows a deduction because Congress passed a law saying that 80% of this type of donation is deductible.

Section 170(l) of the Internal Revenue Code deals with precisely this issue. That subsection says that when somebody donates money to a college or university, and the donor receives "the right to purchase tickets for seating at an athletic event in an athletic stadium of such institution," and the donation otherwise would be a fully deductible charitable donation, then the donor is allowed to deduct 80% of the total amount.

Congress apparently made the somewhat arbitrary decision that 20% of the donation is deemed to have been given in exchange for the right to buy tickets, and therefore is not really a gift. The advantages of the 80/20 rule are that it's easy to apply and it avoids the difficult question of trying to put a fair market value on the right to buy tickets for various sports at various universities.