This is an area of great confusion and frequent error, often because charities do not retain the information necessary for the accountants to fill out the form correctly.  The new Form 990 is more detailed and requires the information on Schedule G when the total of gross income and contributions from fundraising events is more than $15,000.

In the example you pose, which is a typical “quid pro quo” donation in return for goods and services, the donor may deduct, and the charity should recognize, a contribution equal to the amount paid in excess of the value of the goods or services received in return.  In this example, the donor paid $300 for a $50 value and is entitled to claim a contribution deduction of $250.

On the Statement of Revenue in Part VIII of Form 990, the $250 gift is noted in the parenthesis outside the boxes on question 8, and recorded as a fundraising event contribution on line 1c at the top of the page.  The $50 “paid” for the event is recorded as gross income from the event inside the box on line 8a.

If the charity paid $50 for the dinner, that direct expense is recorded in line 8b, so that there is a net income of $0 in line 8c.  If the dinner was donated, there may be no direct cost on line 8b, and a net income of $50.  If the charity paid more than it was worth, it would show a net loss.  (If the dinner was donated, the charity ought to show the deductible amount of the contribution as an additional gift on the return.) 

This calculation has to be made for each ticket sold, of course, and where different levels of support are given for the same dinner, the contribution value of each level will be different.  The aggregate contributions should be shown along with the aggregate payments and aggregate costs.  Schedule G shows this calculation in more detail.  (See Ready Reference Page: “Form 990 Reporting for Special Events Can Be Tricky – And Is Often Wrong”)