Charitable deduction erased by statement's omission

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


Year-end tax planning and what’s new for 2016

Practitioners need to consider several tax planning opportunities to review with their clients before the end of the year. This report offers strategies for individuals and businesses, as well as recent federal tax law changes affecting this year’s tax returns.


News quiz: Retirement planning, tax practice, and fraud risk

Recent reports focused on a survey that gauges the worries about retirement among CPA financial planners’ clients, a suit that affects tax practitioners, and a guide that offers advice on fraud risk. See how much you know with this short quiz.


Bolster your data defenses

As you weather the dog days of summer, it’s a good time to make sure your cybersecurity structure can stand up to the heat of external and internal threats. Here are six steps to help shore up your systems.