An anonymous donor on June 8 paid $3.46 million to Glide, an antipoverty group in San Francisco, for the privilege of having lunch with Warren Buffett.
Is the donation tax-deductible? Experts say most of it probably is, meaning taxpayers in effect will pick up about $1.2 million of the tab.
"Celebrities of all sorts use their fame to support charities, both big and small, and the same rules apply," says David Lifson, a partner at Crowe Horwath, an accounting firm in New York.
The lunch is Glide's 13th annual auction of a meal with Mr. Buffett. This year's winning bid was almost $850,000 more than last year's; the lunches have raised nearly $15 million for the group, which was a favorite of Mr. Buffett's deceased first wife, Susan.
Like any other charity, Glide will have to send the donor a letter saying how much of the gift is tax-deductible, and the assessment must be able to withstand a challenge by the Internal Revenue Service. Last month, the U.S. Tax Court, in a case known as Mohamed v. Commissioner, denied an $18.5 million charitable deduction by a California couple who didn't have correct paperwork before they filed their return.
Experts expect Glide's letter to exclude the fair-market value of the lunch from the donation total. The law mandates a disallowance for any goods or services received in connection with the donation, such as the lunch, which includes Mr. Buffett, the donor and up to six invited guests. The fair-market value is the cost of the prepared food to regular diners, not the purchase price of the groceries at a market.
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