Recent IRS audit activity serves as a reminder that when you make a charitable gift, you must obtain the proper documentation in order to be able to take an income tax deduction. This documentation includes an acknowledgement letter from the charity and a qualified appraisal for non-cash gifts.
For all charitable contributions of $250 or more, IRC Section 170(f)(8) requires that the donor obtain contemporaneous written acknowledgement of the gift from the charity. The acknowledgement must include: i) the amount of cash and a description (but not value) of any property other than cash contributed; ii) whether the donee organization provided any goods or services in whole or in part for the gift; iii) a description and good faith estimate of the value of any goods and services provided by the donee other than intangible religious benefits; and iv) if the only goods and services provided by the donee consist of intangible religious benefits, a statement to that effect. In order to meet the requirement that the statement be “contemporaneous,” it must be received by the donor on or before the earlier of the date the donor files his original income tax return for the year of the donation or the due date (including extensions) for filing the original income tax return for that year.
When you make a charitable contribution, you must be sure that you receive the donee’s written acknowledgement and that is satisfies the above requirements. We have seen a number of these that fail to state whether the donee provided any goods or services to the donor. The statement is not filed with the donor’s return but the donor must retain it with his tax records. In some recent audits, the IRS has asked people to fax copies of their donation acknowledgement forms to an IRS office.
The other requirement you must be sure you satisfy is to obtain a qualified appraisal for any non-cash gifts. IRC Section 170(f)(11)(C) requires that a qualified appraisal be obtained for any contribution of property for which a deduction in excess of $5,000 is claimed. You must complete and attach From 8283 to your income tax return, including Section B. The appraiser must complete and sign Part III of the form and donee must complete and sign Part IV. Both the qualified appraisal and the appraiser must satisfy a series of very specific requirements set forth in Treas. Reg. Section 1.170A-13(c). If you file your income tax return electronically, you must still mail in the completed and signed Form 8283 along with transmittal Form 8453. If a deduction in excess of $500,000 ($20,000 in the case of art) is claimed, the qualified appraisal must be attached to the donor’s income tax return. An appraisal is not required for gifts of publicly traded securities. Paying careful attention to these requirements will help you insure that your deduction is allowed if your return is audited.