Church Members Denied Full Deduction for Donations to Their Church

Failure to meet substantiation requirements was the main factor, court says.

A married couple claimed a charitable contribution deduction of $4,100 on their federal tax return for contributions they made to their church. The only proof they had for their alleged donations was a photocopy of a “contribution receipt” from their church dated December 30 of the year in question, showing contributions during the year of $3,660. The receipt was generated by a computer word processing program and was not printed on an official letterhead of the church. The photocopy had the signature of the pastor and contained the stamped seal of the church. The IRS audited the couple’s return and allowed a deduction of only $450 due to a lack of substantiation. The couple appealed to the Tax Court.

The court began its opinion by noting, “For contributions of money, taxpayers must maintain canceled checks, receipts from the donee organizations showing the date and amounts of the contribution, or other reliable written records showing the name of the donee, date, and amount of the contribution. Taxpayers bear the burden of proving they are entitled to deductions claimed.”

The court acknowledged that “in some cases where a taxpayer’s records are inadequate to substantiate a claimed deduction, we may estimate the amount.” But, “in order for the court to make an estimate, we must have some basis in fact upon which an estimate can be made.”

The court concluded, “While we have some doubt about the reliability of the contribution receipt and the amount of the couple’s contributions, we find that they attended church and made some contributions to the church in [the year in question]. Bearing in mind that they have the burden to prove that they are entitled to the claimed deduction, we hold that they are entitled to an additional deduction of $800 for donations to the church. Thus, they are entitled to a total charitable contribution deduction of $1,250 (including the $450 previously conceded by the IRS).” Kellum v. Commissioner, T.C. Summary Op. 2005-29 (2005).

Resource. For a full explanation of the substantiation requirements that apply to all forms of charitable contributions see Richard Hammar’s Church & Clergy Tax Guide.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

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