A taxpayer (“Jack”) claimed the following charitable contribution deductions on his tax return: (1) $16,000 of cash contributions to his church, and (2) $5,000 for the gift of his car to the president of a parachurch ministry (“Gene”). Jack had no written records to substantiate the cash gifts he allegedly made to his church. The Tax Court noted that “without written records, a deduction for charitable contributions generally is not allowed.” However, the Court noted that in certain circumstances it had allowed a deduction “even without written records where a taxpayer provides a sufficient basis to estimate the amount of the contributions, such as showing regular church attendance and regular cash contributions thereto.” While the Court conceded that Jack attended church every Sunday and often donated cash, even when he traveled, “he failed to establish any regularity in occurrence or extent of the donations from which we could estimate an amount.” Therefore, the Court reduced Jack’s contribution deduction to $6,300 for the cash contributions made to the church. With respect to the car, the Court acknowledged that Gene was the president of a parachurch ministry. But it noted that the car was titled solely in Gene’s name and not in the name of the ministry. Therefore, “it is clear that the car was transferred to Gene individually and not to the charitable organization. Thus, the [gift of the car] was not made to a qualified [charitable] organization” as required in order for Jack to be entitled to a charitable contribution deduction. The Court noted that while Jack’s actions “may have been entirely altruistic and intended to benefit [the ministry], the contributions are not deductible.” Barck v. Commissioner, T.C. Summary Opinion 2001-51.
Key point. To be tax-deductible, a contribution must either be “to” or “for the use of” a tax-exempt charity. As this case illustrates, this requirement ordinarily is not met when a donor makes a contribution of cash or property directly to an individual. However, in some cases, deductible contributions can be made to individuals who are acting as “agents” of a charity. For example, some foreign missionaries act as agents of their missions board when raising funds, and so contributions made directly to such missionaries may be tax-deductible depending on the circumstances.
Key point. Many persons have attempted to give a car to their pastor and claim a charitable contribution deduction for the value of the car. As this case illustrates, if the title to the car is placed directly in the name of the pastor, the donor ordinarily will not be able to claim a charitable contribution deduction. Even if the car is titled in the name of the church, the IRS may challenge a charitable contribution deduction if the church was acting solely as an “intermediary” through which the gift was processed and exercised no real control over the donated property.
This content originally appeared in Church Treasurer Alert, July 2001.