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Document Non-Cash Charitable Contributions - By John R. Bullis, CPA

Updated: Feb 21, 2023

Mr. and Mrs. Moore lived in Ohio and their individual income tax returns for 2013, 2014 and 2015 were selected for audit by IRS.

The audit report showed the taxpayers failed to report cancellation of indebtedness income; failed to report wages; failed to report retirement income and failed to keep detailed records of the non-cash contributions.

IRS also assessed a 20% accuracy related penalty. The Tax Court in a memo decision found the IRS audit to be correct.

They claimed non-cash contributions of $20,590, $11,372 and $21,566 for 2013, 2014 and 2015 respectively.

They did have some donation receipts, but the receipts did not list the items donated. They did not keep reliable written records of the contributions, so the court disallowed all of their non-cash contributions.

This all brings to mind the need to be sure the donation receipt lists at least a general description of what was given. If the charity does not list the items on the receipt, then you need to do a list and keep good records.

Generally, it is best to make a list of what was given as you put the items in the box or sack. If you would also indicate your best estimate of original cost and the estimated fair market value it will help get the tax saving tax deduction.

With cell phones so handy now, it would be good to take a few photographs of the items, either as you gather them and/or when you deliver to the charity.

Because the taxpayers had other “mistakes” on their returns and the amounts were significant, IRS assessed the 20% accuracy related penalty and the court upheld the application of the penalty.

With the new tax law charitable contributions continue to be valuable. It is good to clean out some of the “stuff” we have not used for a few years. Donating to a charity allows someone to use the items. Just be sure to get and save the receipts and keep records to show why the estimated fair market values (what the charity is likely to sell it for) are reasonable.

Did you hear “Why are opportunities always bigger going than coming?” Author Unknown

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