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18 Jan

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Are your charitable gifts really deductible? You might be surprised.

January 18, 2013 | By | No Comments

Charitable Contribution

Mr. Durden contributed $22,500 to his church and claimed it as a deduction on his individual income tax return.  Under IRS audit, Mr. Durden provided the agent with written acknowledgement provided by his church.  Slam dunk – right?

Not so quick.  Let’s review the rules.  There must be contemporaneous written acknowledgement from the charity, by the time of filing the return claiming the deduction, indicating two things:

  1. Either the amount of cash or description of the property contributed, and
  2. Whether the charity provided any goods or services in consideration for the contribution.

Unfortunately for Mr. Durden, he had contemporaneous written acknowledgement for the first requirement (cash contributed) but not for the second.  The letter received from the charity did not explicitly state that no goods or services were received in consideration for the contribution.  The IRS denied his charitable contribution.

It should be noted that Mr. Durden did submit a second acknowledgement with the required language, but the court refused to consider the second acknowledgment, finding that it did not meet the contemporaneous requirement.

Bottom line – as you receive charitable contribution receipts, be sure to review them carefully to make sure that it includes the required language.