The Tax Court upheld a disallowance of more than $22,000 of a couple’s charitable contribution deduction solely for the lack of a contemporaneous statement from their church, the donee, that the couple received no goods or services in return.
The taxpayers, David and Veronda Durden, made the contributions by check, with most of the checks larger than $250, and claimed the amount as part of a $25,171 charitable contribution deduction on Schedule A of their joint return for 2007. The IRS disallowed the deduction, and the couple produced records of the contributions, including copies of canceled checks and a letter dated Jan. 10, 2008, from the church acknowledging $22,517 in contributions during the year. However, the IRS did not accept the acknowledgment because it lacked the required statement.
Sec. 170(f)(8) provides that, to be deductible, a money contribution of $250 or more must be substantiated by a contemporaneous written acknowledgment by the donee organization that indicates the amount and whether the organization provided any goods or services in consideration for the contribution and, if so, a good-faith estimate of their value.
The Durdens obtained a second letter from the church dated June 21, 2009, that contained the same information as before, plus the statement. However, the IRS did not accept it, either, since it was not contemporaneous, defined by Sec. 170(f)(8)(C) as obtained by the taxpayer by the return’s due date (including extensions) or, if earlier, the date the taxpayer files the return.
The Tax Court rejected several arguments by the taxpayers, including that the doctrine of substantial compliance should allow the deduction. The doctrine has been applied where, despite a lack of strict compliance, taxpayers have fulfilled the essential statutory purpose of a requirement. The essential statutory purpose of the acknowledgment requirement is to assist taxpayers in determining their deduction and to aid the IRS in processing returns, the court said. But without a statement that no goods or services were received from the donee organization, neither purpose can be fulfilled, the court said.
Durden, T.C. Memo. 2012-140