Lack of Substantiation Nixes Charitable Deduction for Household Items

For a contribution of property other than money, you generally must maintain a receipt from the donee organization that shows the organization’s name, the date and location of the contribution, and a detailed description (but not the value) of the property. If circumstances make obtaining a receipt impracticable, you must maintain a reliable written record of the contribution. The information required in such a record depends on factors such as the type and value of property contributed.  We are seeing more cases where the IRS has denied charitable contributions based on inadequate records.

A taxpayer claimed a charitable contribution deduction of $37,315 for donations of household goods to four charities. Items given to Goodwill were taken in batches at various times and placed in large bins for after-hours drop-offs or outside the warehouse door. Other items were scheduled for pickup and left outside his house, with a receipt from the charities thanking him for his contribution. However, he did not provide evidence to show the condition of the donated items or obtain an appraisal (for property contributions valued at more than $5,000) to support their value. Although the Tax Court believed the taxpayer donated property to the charities, it disallowed the deduction because the substantiation requirements of IRC Sec. 170(f)(8) and (11) were not satisfied. In addition, the taxpayer was subject to a Section 6662 accuracy-related penalty of $2,468.  Please contact our office for details on documentation requirements for charitable donations.

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