To calculate the taxable value of an item won at a gala held by a nonprofit, you must first determine the fair market value (FMV) of the item. The FMV is the price at which the property would change hands between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of all the relevant facts. Once you have determined the FMV of the item, compare it to the winning bid amount. If the winning bid is more than the item's FMV, the difference between the winning bid and the FMV is considered a charitable contribution, which may be tax-deductible for the bidder, subject to the applicable deduction limits. The portion of the winning bid that represents the FMV of the item is considered the taxable value, as the bidder has essentially paid the retail value for the item. For example, if the FMV of an item is $500, and the winning bid is $700, the taxable value of the item would be $500. The remaining $200 may be considered a charitable contribution by the bidder. Keep in mind that the taxable value of the item should be reported to the winning bidder, and they should consult a tax professional for specific advice on their tax situation.