Charitable Contributions – Part 2

Church Law and Tax 1989-03-01 Recent Developments Charitable Contributions Richard R. Hammar, J.D., LL.M., CPA

Church Law and Tax 1989-03-01 Recent Developments

Charitable Contributions

Will notations made on a kitchen calendar support a taxpayer’s alleged contributions to her church? Yes, concluded the Tax Court in a recent decision. The donor attended a Baptist church, and regularly made cash contributions (of both checks and currency) to the church. In addition, she loaned the church $1,600 for the purchase of a bus (and later forgave the debt), and purchased gas for the church bus on several occasions. The church maintained no formal record of the nature or amount of contributions made by any of its members, and accordingly the taxpayer in question received no receipts for her contributions (of cash, checks, gas, or debt forgiveness). She did, however, maintain a kitchen calendar on which she made notations regarding her contributions to the church. The calendar notations reflected regular Sunday contributions to the church as well as the purchase of gas for the church bus. The taxpayer’s 1984 income tax return was audited, and the IRS questioned the $3,462 that the taxpayer claimed as charitable contributions. The Tax Court ruled that the taxpayer was “entitled to deduct the amounts she recorded on her church calendar.” It observed that “in addition to being documented on her calendar, [the taxpayer’s] contributions to the church are substantiated by her own testimony, the testimony of the church’s pastor, and records from another church verifying contributions of comparable amounts in subsequent years [the taxpayer changed churches in 1985]. We find [the taxpayer’s] testimony to have been candid and credible and we believe that she contributed cash, loan repayment checks, and gas purchases to the church during 1984.” The court cautioned that the recordkeeping requirements of income tax regulation 1.170A-13 “appear to require documentation different than that provided by [the taxpayers’s] calendar notations.” However, the IRS never made compliance with the regulations an issue, and accordingly the court concluded that it did not have to determine “whether, in the absence of cancelled checks or receipts from the donee, [the taxpayer’s] calendar notations constitute ‘reliable written records'” as required by the regulations. Specifically, regulation 1.170A-13 requires that a contribution of money made in 1983 or later years be supported by (1) a cancelled check, (2) a receipt from the donee charitable organization, or (3) in the absence of a cancelled check or written receipt from the charity, “other reliable written records showing the name of the donee, the date of the contribution, and the amount of the contribution.” The regulation further specifies that “factors indicating that written records are reliable include, but are not limited to, (a) the contemporaneous nature of the writing evidencing the contribution, (b) the regularity of the taxpayer’s recordkeeping procedures; for example, a contemporaneous diary entry stating the amount and date of the donation and the name of the donee charitable organization made by a taxpayer who regularly makes such diary entries would generally be considered reliable, and (c) in the case of a contribution of a small amount, the existence of any written or other evidence from the donee charitable organization evidencing receipt of a donation that would not otherwise constitute a receipt under … this section.” It is entirely possible that the taxpayer’s entries on her kitchen calendar would constitute “other reliable written records” under this standard. Burns v. Commissioner, T.C.Memo. 1988-536.

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