Deductibility of Charitable Contributions

In a recent Tax Court Memorandum, the Court held that a charitable  deduction for more than $25,000 was not allowed, because the charity, a church, failed to provide a contemporaneous statement concerning provision of goods or services. The Church, in its receipt, provided the amount and the date of the contribution. Later, upon request, it proved a statement as to goods and services. However, the Court held that the subsequent statement did not meet the “contemporaneous” requirement and therefore the deduction was denied.

Please note, there was no question (1) whether the charity was a qualified charity, or (2) whether the contribution in fact occurred.

Section 170(f)(8) of the Internal Revenue Code requires that a monetary contribution of $250 or more must be substantiated by:

  1. A contemporaneous written acknowledgment,
  2. That indicates the amount paid by the taxpayer, and
  3. Whether the organization provided any goods and services in consideration (or in exchange) for the contribution, and if so, a good faith estimate of the value of such goods and services.

Regulations interpret “contemporaneous” to mean the earlier of (1) the filing of the tax return for the year in question , or(2) the due date of the return, including extensions.

Often taxpayers disregard their receipts for charitable contributions thinking; “If I get audited I’ll just go to the charity and they will give me a receipt”. Maybe not, it is no longer enough to make the contribution by check or credit card and retain the documentation, but we must ensure that the acknowledgement is received timely and with the statutory language.

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