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Lack of contemporaneous written acknowledgement nixes donation


Brian Whelan

Lack of contemporaneous written acknowledgement nixes donation

In a case that provides a lesson to anyone donating property to charity for which a deduction of more than $500 is claimed – get proof in writing and get it at the time you donate the property. After-the-fact substantiation, no matter have convincing, is not acceptable under the tax law to support a deduction.

Case in point: The Tax Court, in Izen, Jr. v. Commissioner, 148 TC No. 5, found that a failure to follow the substantiation rules for donation of an aircraft precluded a taxpayer from claiming a deductions. The taxpayer’s evidence of donation did not satisfy the substantiation requirements, which are heightened for donations of vehicles, including aircrafts.

The taxpayer was assessed a deficiency on his federal income tax return for the year at issue. He then filed an amended return on which he claimed that he had donated a 50 percent interest in an aircraft to a tax-exempt historical society. His interest in the plane was appraised at $340,000, and he claimed a charitable contribution deduction in that amount.

Accordingly, the taxpayer filed an amended return on which he claimed that he had donated a 50 percent interest in an aircraft to a tax-exempt historical society. His interest in the plane was appraised at $340,000, and he claimed a charitable contribution deduction in that amount.

The Tax Court observed that under Code Sec. 170(f)(12), contributions of used vehicles, including airplanes, whose claimed value exceeds $500, must satisfy special substantiation requirements. A taxpayer must obtain a contemporaneous written acknowledgment and include the acknowledgment with his or her return. Further, if the donee has not sold the vehicle or aircraft, the donee must certify the intended use or improvement to the property, among other requirements. Additionally, the donee must provide the IRS with a copy of the acknowledgment. The IRS developed Form 1098-C for this purpose.

The court found that the taxpayer did not include the requisite copy of Form 1098-C with his amended return, nor did the IRS receive the form from the historical society related to the taxpayer’s donation of the aircraft.

Although the taxpayer did include a copy of a letter to the IRS that was from the historical society thanking him for the donation, the court found that the letter failed to satisfy the contemporaneous written acknowledgement requirements. The letter failed to include the name and taxpayer identification number of the donor, among other items.

The court also rejected the taxpayer’s purported deed of a gift as satisfying the contemporaneous written acknowledgment requirement. The “aircraft donation agreement” did not meet the statutory requirements for a contemporaneous written acknowledgment. Like the letter, the deed failed to include the taxpayer identification number of the donor. The deed also did not include a certification of intended use.