Have we reached the point where this bitter cliche has become true? It sure seems like it in this instance. In a recent tax court case, IRS argued that a taxpayer’s charitable contribution to their church was not allowable. In this case (TC MEMO 2012-140), the church provided the taxpayer with an annual giving statement before the due date of their tax return, as required under Section 170 of the Internal Revenue Code. However, it failed to provide a statement, as also required by IRC Section 170, that no goods or services were provided in consideration for the contributions. The IRS did not argue the validity of the contribution, only that it was not allowable under that statute because it lacked the required statement. So, the taxpayer got a revised statement from the church stating that no goods or services were provided in consideration for the contributions. So, that cleared it all up, right?
Wrong. The Court found in favor of the IRS. The statute requires that the statement be provided to the taxpayer before the due date of their tax return, AND that it contain a statement that no goods or services were provided in return. In this case, the statement about the goods and services was not provided until after the due date of the return, so no deduction was allowed. This is a good example of how the Tax Code works and how the IRS operates. The Internal Revenue Code is a set of rules that must be followed closely to ensure proper receipt of the benefits there under. Though a reasonable person may have allowed this deduction, the IRS is not supposed to judge what is reasonable under the Code. Instead, the IRS is supposed to enforce what is written under the Code. As this case demonstrates, the Tax Code was not written to be flexible, or reasonable, and the IRS was not purposed to be flexible or reasonable either.
Lesson learned – You must get documentation from the charity, before the due date of your return, which states that no goods or services were provided in exchange for your contribution. This is necessary for any contribution of $250 or more. They can’t take away the warm fuzzy feeling you get from charitable giving, but as this case proves, they can certainly take away your tax deduction.
Leave A Comment
You must be logged in to post a comment.