Strict Interpretation of Acknowledgment Requirement. In three recent cases, the Tax Court disallowed charitable contribution deductions of more than $250 where the taxpayers did not obtain a contemporaneous written acknowledgment of the contribution by the donee that stated whether the donee provided any goods or services in consideration for the property contributed.
a. In Durden v. Comm’r, T.C. Memo. 2012-140, the Durdens made numerous contributions to their church (NCC) in 2008, almost all of them larger than $250. They claimed a $22,000 charitable contribution deduction on their return, which was challenged by the IRS for lack of compliance with § 170(f)(8), which requires a contemporaneous written acknowledgment by the donee for gifts of $250 or more. The acknowledgment must state whether the done provided any goods or services in consideration for the contribution, and provide a description and good-faith estimate of the value of any such goods or services provided. An acknowledgment is contemporaneous if obtained on or before the earlier of the date the taxpayer files his or her original return for the year of the contribution, or the due date (with extensions) for that return.
2) The Durdens then obtained a second letter from NCC dated June 21, 2009 (not a “contemporaneous” acknowledgment), that contained the same information as the prior letter, but also included a statement that no goods or services were provided by the church to the Durdens.
3) The Tax Court upheld the disallowance of the $22,000 deduction, rejecting the argument that the Durdens “substantially complied” with the substantiation requirements. The second letter from NCC was not a contemporaneous acknowledgment and therefore the Court did not consider it.
4) The first letter failed to specifically state whether goods or services were provided, and prior cases hold that a specific statement is necessary for the allowance of a deduction. See Friedman v Comm’r, T.C. Memo. 2010-45.
5) The statute is clear that “no deduction shall be allowed” for any contribution of $250 or more unless the required acknowledgment is obtained, and an affirmative statement is required as to goods and services provided to the taxpayer. The contemporaneous acknowledgment the Durdens received did not reflect “substantial compliance” because it lacked the required statement.