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Charitable Deductions Only Allowed If Taxpayer Meets Strict Substantiation Requirements

Taxpayers may deduct charitable contributions made during the tax years (§ 170(a)(1).



Hooray!

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However, deductions are only allowed if the taxpayer obtains "contemporaneous written acknowledgment" (CWA) from the donee's organization.



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A CWA must include:

  1. amount of cash and a description (but not value) of any property other than cash contributed

  2. whether the organization provided any goods or services in exchange for a donation

  3. a description and good faith estimate of the value of any such goods or services.

Furthermore, the taxpayer must obtain the CWA before the return is filed (i.e. must be contemporaneous)


Tax Courts have ruled: "A CWA is not required to take any particular form but the requirement that a CWA be obtained 'is a strict one'". -T.C. Memo. 2022-53 ALBRECHT vs. COMMISSIONER


Let's take a look at some tax court cases:


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In Albright Vs. Commissioner:


The taxpayer donated a large collection of Indian artifacts to an American Indian Museum in New Mexico.


Museum provided donors with a "Deed of Gift" that included:

-Description of items donated

-Conditions of the gift and a stipulation that the "donation is unconditional and irrevocable"


The IRS argued that the Deed of Gift did not satisfy the requirements of the CWA because it did not state that no goods or services were provided in exchange for the donation.


And the Tax Court agreed with IRS...the taxpayer's donation deduction was disallowed.



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