Deduction Denied Due to Lack of Proof

Tax court says couple couldn’t substantiate contributions to church.

A married couple (the “taxpayers”) claimed a $5,000 deduction on their tax return for contributions made to their church. The IRS audited the couple, and denied any deduction due to a lack of substantiation. The couple appealed to the Tax Court, which affirmed the IRS determination:

The taxpayers contend that the $5,000 deduction “represents our weekly cash basket giving of around $100 a week” to our church. But the taxpayers never identify what church they attended or its location. In any event, anonymous cash contributions to a collection plate hardly satisfy the substantiation requirements of [the tax code] and the applicable regulations, and the taxpayers candidly admit that no record of such contributions was ever maintained. On the other hand, the court is satisfied that petitioners did donate some cash when they attended religious services. Accordingly, bearing heavily against petitioners whose inexactitude is of their own making, the Court holds that petitioners are entitled to a deduction for cash contributions of $500.

The taxpayers also claimed a deduction for clothing donated to the Salvation Army. The Tax Court denied this deduction, concluding:

The taxpayers contend that they inadvertently shredded their receipt from the Salvation Army. Yet on their Form 8283 they did not even describe or otherwise identify the type or nature of the property donated, and at trial spoke only of “stuff” and “goods”. They may very well have donated clothing and household items to the Salvation Army. But if so, the record contains not a shred of evidence regarding the fair market value of such property … other than their self-serving statement on Form 8283. Under these circumstances the court is unable to estimate any allowance for to do so would amount to unguided largesse. Accordingly, the court holds that the taxpayers are not entitled to a deduction for any contribution of property. Koriakos v. Commissioner, T.C. Sum. Op. 2014-70 (2014).

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

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