We are in the process of registering golfers for our annual tournament and we have a golfer (who is also a vendor that we do business with regularly) who decided to deduct $500 from a bill that we owe him instead of paying for his golf registration. How should I go about entering this in RE? Would it go in as a regular cash gift or should I put it in as an in-kind with a value of $500? Any thoughts here would be greatly appreciated. Rebecca

It might depend on what the vendor provided you.  If they were services - giving you services for free or discounted can't be counted as a gift at all.  (see IRS publication 526)

If they were material goods that were discounted then you may be able to book a gift of a Bargain Sale (see page 12 of IRS publication 526.)  then you can apply that gift to the payment they owe.

I am not sure that you would ever let the golfer "decide" themselves how to do this.  They may not understand the implications on you and them.  In the future I would recommend that they pay you what they owe and you pay them what you owe.  Its all the same anyway and then there are no issues. 

Let me preface this by saying, we are in a small town, doing business with small companies, so this can get a bit tricky. If it had been up to me, I would have had him pay for his registration separately, but this is something that he did on his own, and told us about after the fact. I do not want to jeopardize the relationship we have with this donor but I do want to make sure we handle this appropriately. I will check out the IRS publications that you mentioned above. Thank you for your help on this.