Substantiating Contributions of Property

Court rules “self-generated receipts” are not enough for substantiation requirements.

A taxpayer claimed a substantial charitable contribution deduction on his income tax return. The IRS later audited his return, and challenged his deduction. The taxpayer claimed that the deduction was for contributions of various items of property he had made to local churches. His only support for these contributions, however, were “receipts” bearing the churches’ letterhead and on which he had written descriptions and values for the donated items. This was not enough to substantiate the contributions, the IRS concluded. A federal appeals court agreed. It noted that “the taxpayer offered ‘tax receipts’ bearing the charities’ letterheads on which he listed the items donated and their values,” and concluded that these “self-generated receipts” were too unreliable to support a charitable contribution deduction. Tokh v. Commissioner, 2001-1 USTC 50,128 (2001).

Key point. Churches and other charities often provide a piece of letterhead stationery to donors who contribute property, leaving to them the task of inserting a description and value for the donated property on their “receipt.” As this case illustrates, such “self-generated receipts” ordinarily will not satisfy the substantiation requirements. These requirements are explained fully in chapter 8 of Richard Hammar’s 2002 Church & Clergy Tax Guide.

This article first appeared in Church Treasurer Alert, February 2002.

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

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