John R. Bullis: Document non-cash charitable contributions
June 12, 2018
Mr. and Mrs. Moore lived in Ohio and their individual income tax returns for 2013, 2014 and 2015 were selected for audit by IRS.
The audit report showed the taxpayers failed to report cancelation of indebtedness income; failed to report wages; failed to report retirement income and failed to keep detailed records of the non-cash contributions.
IRS also assessed a 20 percent accuracy related penalty. The Tax Court in a memo decision found the IRS audit to be correct.
They claimed non-cash contributions of $20,590, $11,372 and $21,566 for 2013, 2014 and 2015, respectively.
They did have some donation receipts, but the receipts didn't list the items donated. They didn't keep reliable written records of the contributions, so the court disallowed all of their non-cash contributions.
This all brings to mind the need to be sure the donation receipt lists at least a general description of what was given. If the charity doesn't list the items on the receipt, then you need to do a list and keep good records.
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Generally, it's best to make a list of what was given as you put the items in the box or sack. If you would also indicate your best estimate of original cost and the estimated fair market value, it'll help get the tax-saving tax deduction.
With cell phones so handy now, it would be good to take a few photographs of the items, either as you gather them and/or when you deliver to the charity.
Because the taxpayers had other "mistakes" on their returns and the amounts were significant, IRS assessed the 20 percent accuracy related penalty and the court upheld the application of the penalty.
With the new tax law, charitable contributions continue to be valuable. It's good to clean out some of the "stuff" we haven't used for a few years. Donating to a charity allows someone to use the items. Just be sure to get and save the receipts and keep records to show why the estimated fair market values (what the charity is likely to sell it for) are reasonable.
Did you hear? "Why are opportunities always bigger going than coming?" –Author Unknown
John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.