Law Office of John S. Palmer Attorney at Law

Charitable Donation? Get a Receipt!

Posted Tuesday, April 30, 2013 by John S. Palmer

The U.S. Tax Court has issued a decision illustrating the importance of obtaining proper documentation of charitable donations in excess of $250 if the donor intends to claim the donation as a tax deduction.

In Villareale v. Commissioner (TC Memo 2013-74, decided March 12, 2013), a taxpayer who founded and operated an animal rescue organization in Florida made 44 contributions to the organization in 2006 totaling $10,022, of which 17 were for $250 or more.

Although the IRS requires all charitable deductions to be substantiated in writing, it allowed the taxpayer to claim the donations of less than $250, which can be substantiated more informally such as by canceled check or “other reliable written records showing the name of the donee, the date of the contribution, and the amount of the contribution.”

However, it disallowed the taxpayer’s 17 donations of $250 or more, because she did not obtain a “contemporaneous written acknowledgment” from the donee organization as required by Internal Revenue Code Section 170(f)(8). This contemporaneous written acknowledgment must include:

• The amount of any cash the taxpayer paid and a description (but not necessarily the value) of any property other than cash the taxpayer transferred to the donee organization;
• A statement of whether or not the donee organization provided any goods or services in consideration, in whole or in part, for any of the cash or other property transferred to the donee organization;
• If the donee organization provided any goods or services other than intangible religious benefits, a description and good faith estimate of the value of those goods or services; and
• If the donee organization provided any intangible religious benefits, a statement to that effect.

The Tax Court found it immaterial that the taxpayer was on both sides of the transaction, as individual donor and as President of the donee organization, because the purpose of the “contemporaneous written acknowledgment” requirement is not just to assist taxpayers in determining the deductible amounts of their charitable contributions, but to assist the IRS in processing tax returns on which charitable contribution deductions are claimed. Therefore, although the taxpayer “may not have needed a contemporaneous written acknowledgment to assist her in determining the deductible amounts of her charitable contributions, the IRS still needed it to assist in determining whether [she] was entitled to the charitable contribution deduction she claimed.”

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