Do You Have Proper Substantiation For That Charitable Deduction?

Many of us make annual or weekly contributions to a favorite charity, whether a religious institution, school, hospital or other charitable organization. Often taxpayers “assume” they can take a deduction on their income tax return for the contribution just by writing a check. The ability to take the deduction is not automatic.

A charitable deduction is not allowed for a single contribution over $250 unless you have a contemporaneous written acknowledgment” (“Acknowledgment”) from the charity The taxpayer must receive the Acknowledgment the earlier of (1) on or before the due date for the taxpayers’s tax return or (2) the date the return is filed. Thus, if, for 2017 you contribute $1,000, you deduct the amount on your tax return and file the return on April 15, 2018. The charity does not send you an Acknowledgment until May 1, 2018. Unless you can file an amended return, extending the due date of the return, the deduction is denied.

The Acknowledgment must contain the following

  1. Amount of cash or description of contributed property.
  2. Date of contribution
  3. Statement by charity that no goods or services were provided, or if there were goods and services a good faith estimate of those goods or services
  4. Donor’s and charity’s name

In certain circumstances, the charity is NOT required to give a Acknowledgment. However, as the taxpayer needs this Acknowledgment, most charities will provide same or the donor may contribute to another organization.

Examples of Acknowledgments taken from the IRS Publication are as follows:

“Thank you for your cash contribution of $300 that (organization’s name) received
on December 12, 2015. No goods or services were provided in exchange for your
“Thank you for your cash contribution of $350 that (organization’s name) received on May
6, 2015. In exchange for your contribution, we gave you a cookbook with an estimated fair
market value of $60.”
“Thank you for your contribution of a used oak baby crib and matching dresser that
(organization’s name) received on March 15, 2015. No goods or services were provided in
exchange for your contribution.”

If a taxpayer donates property valued at more than $500, then a Form 8283 must be completed. If the taxpayer donates property valued at more than $5,000 then the taxpayer must provide a “qualified appraisal from a qualified appraiser” (the “Appraisal”). There is an exception for publicly traded securities as to the Appraisal.

Many cases have arisen based on substantial compliance with the rules but, not surprisingly, the Internal Revenue Service, (the “Service”) has not been overly lenient. However, if the omission is insignificant, then the court may still allow the deduction.

However, in Hewitt v. Comm’r, an Appraisal was not attached but the taxpayer based the valuation on the average per share price based on a bona fide sale close to the time of the contribution of the stock. While the court determined that the value was correct, the Service stated that the Appraisal was not attached as required by the law and the court denied the deduction.

If, however, a taxpayer receives something in return (‘quid pro quo”) for the contribution, then the charity MUST provide the taxpayer with acknowledgment as to how much was provided in goods and services.

ADVICE: “Don’t “assume” that, because you make a gift to a charitable organization, that it is automatically deductible. When necessary be sure to receive the proper acknowledgment from the organization and keep those documents filed with your tax return information.

WORD OF THE WEEK: “Quid pro quo contribution” means a payment made partly as a contribution and partly in consideration for goods or services provided to the donor by the donee organization. A quid pro quo contribution does not include any payment made to an exclusively religious organization,in return for which the donor receives solely an intangible religious benefit.



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