The election season is in high gear. And I'm sure that your mailbox is being stuffed with solicitations asking (in some cases begging) you to contribute to a specific candidate or political party, both national and local. You might ask yourself, "Would this political contribution be tax-deductible?"

The short answer is a resounding no. You can't deduct any money that is paid either directly or indirectly to a political party or candidate. This is true whether you make the contribution personally or through your business.

Simply stated, you can't deduct, as a business expense or as an itemized deduction, any money paid for:

• Advertising in a political party's convention program, or in any other publication, if part of the publication's proceeds benefits a political party or candidate.

• A ticket to a dinner or program that is intended to benefit a political party or candidate.

• A ticket to any inaugural event -- including balls, galas, concerts, parades, etc. -- since such events are generally associated with the installation of elected political candidates.

If, for example, you buy a ticket to a fundraising dinner for a political candidate, you can't deduct any part of the price of the ticket, even if the candidate donates the proceeds to charity. Similarly, you can't deduct the price of a ticket to an event -- even if it is held for a candidate who was unsuccessful in his bid for political office. For example, the price of a ticket to an event to retire a candidate's campaign debt is not deductible.

You should be aware that these rules apply not only to funds that you pay to the two national political parties but also to:

• Any national, state, or local committee of a political party; and/or

• Any committee, association, or organization whose purpose is to influence the election of any individual to public office.

This being the case, you can't deduct any contributions that you make to a political action committee (PAC) if the PAC spends money to influence the selection, nomination, or election of any individual to elected public office. Since most PACs undertake such influence in some way or another, it's virtually certain that any payments you make to a PAC will be considered nondeductible political contributions.

I certainly realize that money is the mother's milk of politics. And I would also expect you to provide monetary support to your favorite political party, candidate, or PAC. Just don't expect Uncle Sam to subsidize your contribution in the form of a tax deduction.

If you like the way Roy Lewis simplifies confusing tax issues, check out his just-published book, The Motley Fool's Investment Tax Guide 2002: Smart Tax Strategies for Investors. This handy 360+ page guide covers just about every tax aspect of a typical Fool's life: investing, marriage, children, education, homes, home offices, retirement accounts, medical expenses, and much more.)

September 3, 2004

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