Tax Court states that timely proper receipts for charitable contributions from a charity are required for a donation to be deductible

Tax Court states that timely proper receipts for charitable contributions from a charity are required for a donation to be deductible

The United States Tax Court In Durden v. Commissioner, T.C. Memo. 2012-140 (May 17, 2012), held that an income tax deduction was properly disallowed by the Internal Revenue Service for a charitable contribution, because the charity did not provide a statement that no goods or services were provided in consideration for the contributions. The Tax Court had found that the first acknowledgement received by the taxpayer lacked a statement regarding whether any goods or services were provided in consideration for the contribution, and the second acknowledgment, which included that statement, was not contemporaneous.  I.R.C.  Sec. 170(f)(8)(A) provides: “No deduction shall be allowed under subsection (a) for any contribution of $250 or more unless the taxpayer substantiates the contribution by a contemporaneous written acknowledgment of the contribution by the donee organization that meets the requirements of subparagraph (B).”  For donations of money, the donee's written acknowledgment must state the amount contributed, indicate whether the donee organization provided any goods or services in consideration for the contribution, and provide a description and good faith estimate of the value of any goods or services provided by the donee organization. I.R.C.  170(f)(8)(B) and Treas. Reg. 1.170A-13(f)(2). A written acknowledgment is contemporaneous if it is obtained by the taxpayer on or before the earlier of: (1) the date the taxpayer files the original return for the taxable year of the contribution or (2) the due date (including extensions) for filing the original return for the year. I.R.C.  170(f)(8)(C) and Treas. Reg. 1.170A-13(f)(3).  While the taxpayers argued they substantially complied, the Tax Court would have none of it holding:  Petitioners have failed strictly or substantially to comply with the clear substantiation requirements of section 170(f)(8), and their deduction for the charitable contributions in issue for 2007 must be disallowed.

 

Moral of the story: when making contributions to charities, obtain a statement from the charity indicating whether or not there was value received from the charity and maintain that receipt with your records in case you are audited.  This should be obtained before the tax return claiming the deduction is filed.