Let’s be clear. There was no dispute over the amount of cash the Durdens gave, when they made their gifts or whether the church was a qualified charity; it was.
So why did the IRS disallow the Durdens’ claimed charitable deduction? This is where things get interesting and a valuable lesson is taught.
It turns out all but $317 of the contributions consisted of gifts each in an amount greater than $250. For any charitable gift of $250 or more, the donor must substantiate the gift with a contemporary written acknowledgment from the donee that states, among other things, whether the donee provided any goods or services to the donor in consideration of the gift.
The Durdens did get a “contemporary” gift receipt from the church on January 10, 2008. It was contemporary because the Durdens got it way before the due date of their 2007 tax return (and way before they filed their 2007 return). But it was a worthless receipt for tax purposes, because it didn’t state whether the Durdens had received any goods or services from the church in consideration of their gifts. In fact, the Durdens received no goods or services from the church.
The Tax Court agreed with the IRS that the Durdens had failed to substantiate their 2007 cash contributions to the church and were therefore not entitled to any charitable deduction for these gifts (except as to the $317 of gifts mentioned above).
Oh, by the way, the Durdens got a second, “corrected” gift receipt from the church in 2009, shortly after the IRS had audited them for 2007. But the Tax Court held that this receipt also was worthless, because although it contained the no-goods-or-services language, it was issued to the Durdens way after the date they filed their 2007 tax return and therefore was not “contemporaneous.”
The Durden case was decided by the Tax Court on May 17, 2012. Read more about the case by clicking here. It’s a good idea to review and have for reference IRS Publication 1771 for details on substantiation and disclosure requirements for charitable contributions.
by Jon Tidd