Gift Substantiation: Two Recent Tax Court Cases Are Revealing | Sharpe Group
Posted April 4th, 2018

Gift Substantiation: Two Recent Tax Court Cases Are Revealing

What they reveal is how tough the IRS and the Tax Court have gotten on gift substantiation . . . gift receipt and “Qualified Appraisal” rules.

The first case involves a gift of real estate to the University of Michigan. The donor was a partnership that had purchased the real estate for $2.5 million. More than one year after purchase, the partnership gave the real estate to the university. The partnership claimed a value of $33 million for the property.

The partnership got an appraisal and filed a Form 8283. For some unknown reason, the Form 8283 failed to state the partnership’s cost basis in the donated property, which was $2.5 million.

Held, this omission, all by itself, was sufficient to knock out the entire $33 million charitable contribution claim(!). RERI Holdings, 149 T.C. #1 (2017)

The second case involves some out-of-pocket cash expenditures made by a volunteer on behalf of a charity (a little more than $1,000 in each of 2012 and 2013). The expenditures related to mileage and the purchase of T-shirts for a youth group. The volunteer had a written mileage log and also a purchase receipt for the T-shirt, but the volunteer didn’t have a gift receipt from the charity.

Held, the failure to obtain a gift receipt (which needed to state whether the charity provided any goods or services to the volunteer in consideration of the expenditures) meant the volunteer was entitled to no federal income tax charitable deduction for the expenditures. Martinez, T.C. Summ. Op. 2017-42

Important Note: Such out-of-pocket expenditures are considered cash contributions to charity and need to be acknowledged accordingly.

For more information on gift substantiation:

Charitable Deductions: Revisiting the Basics” (Give & Take, January 2018)

Taxing Matters: Token Donor Gifts” (Give & Take, October 2015)

Gift Substantiation: The Tail That Wags the Dog” (blog post, September 8, 2015)

Avoiding Charitable Tax Traps” (Give & Take, April 2015)

Or contact your Sharpe Group representative at 901-680-5300,

by Jon Tidd, Esq.

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