Tax Court Case – Contemporaneous Substantial Required for Deduction

Sec. 17o(f)(8)(C) says that a contribution of over $250 is not deductible unless the charity sends the donor a letter stating the amount of the donation and also stating that no goods or services were provided to the donor in exchange (or if some were provided, the value provided).

Daniel Gomez and his wife made tithes to their church and took a charitable deduction for the gifts.  On audit, the IRS discovered that the church had not sent a letter with the magic language, language stating that the church had provided the donors with no goods or services in exchange for the contribution.  The Tax Court agreed that the gifts were charitable but disallowed the deduction because the donors had not received a letter with the magic language and thus the substantiation requirements had not been met.  The donors provided cancelled checks in the amount claimed, to no avail.  The church sent a letter during the audit process, but the court ruled that that letter was not “contemporaneous.”

Thanks to Christopher Hoyt , of the University of Missouri at Kansas City, for providing news of this case.  Chris says, “I know the Tax Court followed the letter of the law, but in my humble opinion it is not ‘justice.'”  Agreed.

As Chris also points out, the case serves as a reminder of the importance of the contemporaneous written acknowledgements that charities must send to their donors.

Daniel Gomez et ux. v. Commissioner, T.C. Summ. Op. 2008-93 (July 30, 2008).