How to Lose a Charitable Deduction: The IRS Speaks

The IRS took a hard line with the taxpayer, who made what would otherwise qualify as a tax deductible charitable gift. The problem was that the taxpayer “failed to obtain a contemporaneous written acknowledgment” from the charitable organization. In its advice the IRS said it will deny the taxpayer’s charitable deduction even if the taxpayer takes remedial measures and the charity amends its Form 990 (Return of Organization Exempt from Income Tax) to acknowledge the donation and include the information required by the Code.

Under the Tax Code, a charitable contribution deduction for a contribution of $250 or more is allowed only if the taxpayer substantiates the contribution with a “contemporaneous written acknowledgment of the contribution by the donee organization.” In other words, the charitable organization must verify the details of the contribution at the time the contribution is made. Verification by the charity can’t be made after the fact—for instance, at the time the taxpayer is preparing his or her tax return.

The written acknowledgment must contain specific information, including:

1. The amount of cash and a description of any property other than cash contributed.
2. A statement of whether the donee organization exchanged anything of value with the donor.
3. A description and good faith estimate of the value of anything given to the donor under the previous requirement.

The IRS’s advice complies with a March 8, 2011 Tax Court decision holding that donee acknowledgment of a charitable contribution is necessary in order for a taxpayer to take a charitable