Tuesday, October 28, 2014

Another Large Charitable Contribution Fails for Lack of Substantiation

Submitted by William Delaney, EA of Westwood, MA

If you would like to have, at your side, a primer dealing with how one must document and support a charitable contribution deduction, take a look at a very recent Tax Court case, Thad DeShawn Smith v. Comm., TC Memo 2014-203 (10/2/2014).  After reading this you would wonder why the taxpayer bothered to incur the costs associated with bringing this to court---why would he think that he had a shot at winning?

William Delaney, EA
The Court found that Mr. Smith failed to meet the substantiation requirements for any of his contributions (although the Court believed that some, at least, had been made), so all were disallowed!

One thing which jumped out at me was a discussion of clothing, furniture and electronic equipment donated to the AMVETS.  It is not unusual for such organizations to pick-up your donations and leave a signed, but blank receipt.  Often the receipts are not dated.  The donor would then complete the description area or attach a detailed listing.  The donor might also insert a date.

The Court commented that the AMVETS receipts did not contain a “…description…of any property…contributed.”  Because this type of form is signed in advance (i.e. before the actual donation takes place) the court wondered if they rise to the level of an acknowledgement by AMVETS that it received anything.  Lastly, the only evidence that this form was a contemporaneous receipt was the date which the donor himself inserted.  How much weight would one give to a donor inserted date?

The Court ruled that this “receipt” was insufficient to meet the substantiation requirements of the Code.  Your editor must confess that he has accepted this type of receipt, along with a donor prepared listing of the donations, as adequate substantiation for contributions of $250 or more.  The Court is telling us, however, that such a receipt does not meet the substantiation requirements.

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