Taxpayer Loses A $5.2 Million Deduction.

Beforehand, I mentioned the influence of failure to get a items thanks letter from a charity to have the ability to take a deduction for a charitable present. The Tax Court docket has once more denied a charitable deduction on the identical grounds, now to the tune of $5.2 million.

Within the case of Janet R. Braen, et al., v. Commissioner, T.C. Memo. 2023-85, the Tax Court docket handled consolidated charitable deduction circumstances regarding the sale of undeveloped property by taxpayers/members of the family’ mining S corp. to the city as a part of a settlement for zoning litigation. The courtroom concluded that the taxpayers did not exhibit the worth of all consideration acquired within the sale, ensuing of their disqualification from claiming a proportionate share of the deduction. It was notably evident, when reviewing the land buy settlement and settlement, that the reversion of the zoning designation for the portion of the property retained by the company was a type of consideration that ought to have been valued for deduction functions. Moreover, the taxpayers didn’t fulfill the Contemporaneous Written Acknowledgement (CWA) requirement of Code Sec. 170(f)(8) by offering an outline and good-faith estimate of the worth of any items or companies acquired as consideration. Though the company acquired an acknowledgement letter from the city, it didn’t determine the zoning change as consideration and as a substitute indicated that the city didn’t present any items or companies apart from money. Moreover, the cheap trigger exception of Code Sec. 170(f)(11)(A)(ii)(II) didn’t apply to the CWA requirement.

As a result of meticulous substantiation necessities, the Court docket upheld the IRS’s choice to disallow the deduction in each circumstances. The Court docket can’t infer compliance with the necessities based mostly on the absence of a reference to items or companies, the Reward Settlement, the Deed of Reward, the paperwork filed with the tax return, or the types filed with the tax return itself. No subsequent truth or doc after the submitting date of the tax return will be thought-about. Within the Albrecht case, Choose Greaves doesn’t maintain Mrs. Albrecht accountable, as she made a real effort to adjust to the substantiation necessities of the Inner Income Code. The Court docket sympathizes along with her unlucky end result however nonetheless denies the deduction.

As soon as once more, the Court docket emphasizes the significance of promptly sending a thank-you letter for any presents acquired, even when it is an unattractive sweater hidden within the closet (or on this case the zoning change hidden within the settlement). That is particularly essential for charities that obtain donations. The important thing lesson right here is for donors to confirm whether or not the paperwork supplied by the charity acknowledge their donation sufficiently as a Contemporaneous Written Acknowledgement. Moreover, if there may be any point out of different paperwork, such because the Reward Settlement, it’s important to acquire a duplicate of the doc acknowledged by the charity. Bear in mind to all the time embody the donor’s tax identification quantity on each doc that paperwork the present.