Charitable Contribution Substantiation: No Room for Error!

When you make large charitable contributions you expect to be able to claim those donations as deductions leading to a reduction of your income tax liability. The charitable donation documentation rules found in IRC §170(f) put those deductions at risk of disallowance for what may be perceived as very minor shortcomings in documents obtained regarding the donation prior to the filing of the return on which the benefit is claimed.?

Given how non-obvious these rules are to those who don’t regularly deal with them. As tax advisers working with clients at both the planning phase (when such contributions are begin contemplated) and in the compliance phase (when the returns are being prepared) we insure that you are aware of what the requirements are and that they have been adhered to. Similarly, charitable organizations receiving such contributions need to work to insure that the charity has procedures in place to insure that proper substantial documentation is being to provided to donors.

One has to take into consideration:

The strict compliance doctrine applied to those requirements found in the Internal Revenue Code itself and the slightly less stringent substantial compliance doctrine available for requirements imposed solely by Treasury Regulations

The bank record/receipt requirement applicable to all cash contributions (IRC §170(f)(7))

Contemporaneous written acknowledgment requirements for all contributions in excess of $250 (IRC §170(f)(8)), including the hard and fast deadline requirements for obtaining such acknowledgements

Additional statement regarding “exclusive legal control over the assets contributed” required in the contemporaneous written acknowledgment of a donor advised fund

General non-cash contribution rules including;

Application of the $250 standard CWA rules to noncash contributions

Requirements triggered when the value of similar items exceed $500 (IRC §170(f)(11))

When appraisals must be obtained, or obtained and submitted with a return, for noncash contributions

What is a qualified appraisal and a qualified appraisal"

A look at the facts in specific cases where documentation flaws have denied the taxpayer a deduction for a charitable contribution (Durden v. Commissioner, Albrecht v. Commissioner, Keefer v. United States, Legaspi v. Commissioner and Hewitt v. Commissioner.

We are tax and financial advisors and planners and you need help regarding this and other tax & financial planning help contact us at (562) 281-1040.