written by Brenda Logsdon
The IRS’s rules for substantiating the value of noncash contributions are complex and the requirements increase with the value of the donated property. A recent Tax Court case illustrates the importance of compliance with the substantiation rules for noncash donations. The taxpayer amended his 2009 return to add $27,767 to noncash donations as follows:
- $11,730 for furniture donated from his newly deceased mother’s estate.
- $14,487 for 180 shirts, 63 pairs of trousers, 153 pairs of jeans, 173 pairs of shoes, 51 dresses, 35 sweaters, nine overcoats, and seven suits from his own household possessions.
- $1,550 for electronic equipment including two computer systems, a printer, and a copier.
The Tax Court denied the deductions for lack of substantiation. The taxpayer provided two blank signed receipts from the charitable organization, a spreadsheet listing the items and a Donation Value Guide printed from the Salvation Army’s website on April 2, 2014. The 2014 Guide was used to value the noncash donations made on his 2009 return.
The Tax Code and regulations impose substantiation requirements that become more rigorous as the items of donated property increase in value. The basic rules are summarized below:
Donations of money. A cancelled check, receipt or a letter is required for substantiation of all cash donations. For cash donations of $250 or more, a contemporaneous written acknowledgement is required and must state whether any goods or services, if any, were received in consideration for the donation.
Noncash donations valued at less than $250. If a taxpayer makes a noncash donation of less than $250, he is not subject to the contemporaneous acknowledgement requirement. This is true even if the taxpayer makes more than one donation to the same charity during the year totally $250 or more.
Noncash donations valued at $250 or more. Just as with cash donations of $250 or more a contemporaneous written acknowledgment must be obtained from the charity if the noncash donation is valued at $250 or more. The acknowledgement must contain a description (but not the value) of noncash property contributed and state whether any goods or services, if any, were received in consideration for the donation.
A written acknowledgment is considered contemporaneous if it is obtained by the taxpayer by the date on which the taxpayer timely files his original tax return, including extensions, whichever is earlier for the year of the noncash donation.
Noncash donations valued at more than $500. Taxpayers who claim deductions for noncash donations of the same type (such as clothing or household goods), even if to different charities, valued at more than $500 must satisfy the contemporaneous written acknowledgment requirement and are also required to file Form 8283, Noncash Charitable Contributions, with their return. The form requires the taxpayer to list the cost of the items donated, the date acquired the date donated and how the items were acquired, in addition to the value. This also applies to donations of publicly traded securities and non-publicly traded stock valued at $10,000 or less.
Noncash donations at more than $5,000. All donations of noncash property valued at more than $5,000 (other than publicly traded securities), a single item of clothing or household goods valued at more than $500 and nonpublicly traded stock valued at more than $10,000 must have a qualified appraisal and the appraiser must sign the form 8283.
Motor vehicles. There are special rules for donations of motor vehicles, boats and airplanes.
When itemizing deductions for charitable donations of noncash property, taxpayers should learn the rules and keep the required records, receipts, and photographs. Failure to meet the Tax Code requirements could lead to a hefty tax bill, penalties, and court costs. Please contact us if you have any questions about noncash donations 417-881-0145.