What's the difference in the cost of a buffet lunch for eight people and a Buffett lunch for eight?

That extra “t” in Buffett is going to cost you.

Cryptocurrency gazillionaire Justin Sun just paid $4.57 million in an online auction

by Glide, a San Francisco charity that aids the city's poor and homeless, for lunch with Warren Buffett in New York. Mr. Sun can invite seven guests to the lunch,

We all know that a donor has to reduce the charitable deduction by the value of any goods or services received.

The value of food and drink for eight in a New York restaurant: that's easy—$8,000 tops, including private room, taxes, tips, coat checking and valet parking.

But what about the value of “services”—lunch with the Oracle of Omaha? Over the years, the IRS hasn't claimed that paying to rub shoulders with a celebrity has a tangible value. But suppose that while the shoulders touch, you pick Mr. Buffett's brain for investment advice? That isn't on the menu for the Buffett lunch. But if advice is received, the charitable deduction would have to be reduced by the advice's fair market value.

Point. Mr. Buffett has been a strong critic of cryptocurrencies.

Counterpoint. Mr. Sun plans to invite other cryptocurrency entrepreneurs to the lunch. He says they'll try to convince Mr. Buffett that cryptocurrencies are good investments.

Query. Will Mr. Sun have to reduce a $4.57 million charitable deduction not just by the cost of the lunch, but also by the value of the opportunity of convincing Mr. Buffett to say good things about cryptocurrencies?

Not to worry about Mr. Sun. Any amount not deductible as a charitable gift, could be deductible as an ordinary and necessary business expense.

Donors can rely on a charity's good faith estimate of value in determining how much of a payment to charity is deductible. The charity's estimate of value of goods and services is either: (1) a charity's contemporaneous written acknowledgment of a gift of $250 or more; or (2) a charity's written disclosure of a quid pro quo gift over $75. But a donor who knows, or has reason to know, that the charity's estimate of fair market value is unreasonable may not use the charity's valuation. Reg. §1.170A-1(h)(4).

Example—a good faith estimate of an auctioned item. Donor attends an auction held by Charity. Before the auction, Donor receives a catalog of items that will be available for bidding and Charity's good faith estimate of their value. The catalog qualifies as a written disclosure statement under IRC §6115. Donor successfully bids and pays $500 for a vase that Charity valued at $100. Donor has no reason to doubt the accuracy of that value. Donor's payment qualifies as a contribution. Before making the payment, she knew that the estimated value of the vase was less than her payment, and her payment exceeded the estimate. In determining the amount of her deduction, Donor may treat the vase's estimated $100 value as its FMV. Thus Donor is deemed to have contributed $400. Reg. §1.170A-1(h)(5), Ex. 2.

Ignorance is tax bliss. The following example is not from Treasury regulations, but is mine. It contrasts how much a knowledgeable donor and an unknowing donor are deemed to have contributed.

Example. Donor A bids and pays $2,000 for a lithograph valued at $500 in good faith by the charity in its auction catalog. Donor A, however, knows the lithograph is worth $1,600. He has seen that some lithograph selling in a number of downtown art galleries for $1,600. So, according to the regulations (above), he can only deduct $400. His twin brother, Donor B, bids on an identical lithograph at the same auction and gets the lithograph for $2,000. Donor B hasn't been to any of the art galleries and hasn't spoken to his twin in seven years. Further, Donor B doesn't know anything about art—only what he likes. Presumably, Donor B can deduct $1,500 ($2,000 paid minus $500 good faith estimate of value by the charity).

End note. Warren Buffett and I spoke for about 30 minutes before testifying at the Nov. 15, 2007 Senate Finance Committee hearing on Estate Tax Reform. It didn't cost Mr. Buffett a thin dime. The first thing he said to me was, “How do you pronounce your last name?” He then used my first name so often that it was noticeable. In an excellent biography of Mr. Buffett, “Snowball,” I learned that a certificate from the Dale Carnegie Institute hangs on the wall of his Omaha office.

Conrad Teitell is a principal at Cummings & Lockwood in Stamford, Conn.