Another Large Charitable Deduction Bites the Dust

William Delaney, EA
Westwood, MA

We have previously reviewed Thad Deshawn Smith v. Comm., T.C. Memo 2014-203, 10/2/14, which considered contributions of more than $250 and the substance of the required “contemporaneous written acknowledgement” required by IRC Sec. 710(f)(8)(A).  Because the receipts in the Smith case did not contain a description of the property (it was later attached as a spreadsheet not seen or otherwise made available to the charity); were not dated by the charity; were signed in blank and in advance by the charity---the Court determined that the receipts failed to meet the substantiation requirements in the Code.

Now comes yet another decision regarding lack of substantiation.  In Kenneth James Kunkel and Susan Kathryn Kunkel v. Comm., T.C. Memo 2015-71, 4/8/15, the taxpayers claimed $37,315 in noncash contributions.  The IRS disallowed the entire amount.  Serious stuff, this.

One of the deductions for items donated to a church annual flea market totaled $13,115, consisting of various household items, clothing, toys and jewelry.  No receipts were produced at the audit or at the subsequent court hearing.   Likewise, the taxpayers claimed $24,200 of household items, clothing and toys donated to four charities.  The only document produced was a self-created spreadsheet.

Taxpayers “…contend that they did not need to get written acknowledgements because they made all of their contributions in batches worth less than $250.”  The Court concluded that “…we did not find this testimony credible (contributions on 97 distinct occasions)…This assumption is implausible and has no support in the record.”

In addition to upholding the denial of any deduction for noncash charitable contributions, the Court upheld the imposition of the Sec. 6662(a) 20% accuracy-related (negligence) penalty.