The Tax Court has disallowed a charitable deduction in Albrecht v. Commissioner (T.C. Memo. 2022-53) because the taxpayer efforts at documentation failed to satisfy the statutory requirements.
The taxpayer in the case contributed 120 items from their collection of Native American jewelry and artifacts to the Wheelwright Museum in 2014. The taxpayer and the museum executed a “Deed of Gift” dated Dec. 19, 2014, to document the gift. The deed included a list of all the items gifted.
The second page of the deed stated that “the donation is unconditional and irrevocable; that all rights, titles and interests held by the donor in the property are included in the donation, unless otherwise stated in the Gift Agreement.” No such “Gift Agreement” was included with the deed or provided to the taxpayer by the museum. The only documentation provided to the taxpayer was the “Deed of Gift.” The taxpayer claimed a charitable deduction that was challenged by the IRS.
Section 170(f)(8)(A) and the regulations provide that for gifts over $250 in value, the taxpayer must obtain from the donee organization a contemporaneous written acknowledgement (CWA). For the CWA to be complete, it must include:
- The amount of cash and a description of any property contributed
- Whether the donee organization provided any goods or services in consideration, in whole or in part, for any such property
- A description and good faith estimate of the value of any such goods or services
The IRS contended that the “Deed of Gift” did not specify if the museum provided any goods or services for the donation or state that it represented the entire agreement between the taxpayer and the museum. The IRS argued that the reference to the “Gift Agreement” in the deed created ambiguity as to whether addition terms were part of the donation.
The court held that “by referencing another document that superseded the terms of the deed with respect to the donor’s rights in the donation, the deed provided the donor with the ability to retain an interest in the donation, including under a potential quid pro quo arrangement.” The Tax Court acknowledged that the taxpayer appeared to make a good faith attempt to substantially comply by entering into the “Deed of Gift” with the museum. However, the court disallowed the charitable deduction because the taxpayer did not satisfy the explicit requirements of Section 170(f)(8)(A).
Over the last several years, the IRS and the Tax Court have consistently disallowed taxpayer charitable deductions for any deviation from the substantiation requirements for charitable deductions. At a minimum, taxpayers must strictly comply with all the requirements of the code and regulations, and complete all required portions of any obligatory forms in order to successfully claim a charitable deduction.
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