When it comes to any charitable deduction (e.g. Rooftop Auction), it has to be the amount spent and NOT the valuation of what they should have received.
Using Misha as an example, he donates his services at a value of $500.00. The auction winner ends up securing $800.00 of his total services and as such pays Misha $300.00. Misha books $300.00 towards his annual Revenue and books ZERO on his Schedule A, Itemized Deductions for Charitable Donations.
In order for Misha to wind up with a $500.00 charitable donation, he’d first have to receive $800.00 in this example and then make a donation of $500.00 (cash, check or credit card) to the school. By this, now he books $800.00 towards his annual business Revenue and has a $500.00 Schedule A Deduction.
Bottom line is that Services donated can NOT be valued at what you’d normally get. In these instances, only out of pocket expenses wind up as Charitable Donations.