Date: January 31, 2013
Re: The deductibility of Mal Manley’s charitable contributions. Facts
Our client, Mal Manley, provided information in his individual income tax return client questionnaire to the effect that he made over 100 relatively small cash contributions totaling $25,000 to chartable organizations. The IRS audited Mal’s tax return two years ago and denied 75% of that year’s charitable contribution deduction because the deduction was not substantiated. Issues
The deductibility of Mal Manley’s charitable deductions depend on two issues: first, whether his cash contributions of less than $250 can be substantiated with a bank record, receipts, or payroll deduction records; and second, whether cash contributions of $250 or more, can be substantiated with a separate acknowledgment form the qualified organization. Applicable Law
Section 170 provides that cash contributions include those paid by cash, check, electronic funds transfer, debit card, credit card, or payroll deduction. Cash contributions cannot be deducted, regardless of the amount, unless one of the following is kept: a bank record that shows the name of the qualified organization, the date of the contribution and the amount of the contribution; a receipt from a qualified organization showing the name of the organization, the date of the contribution, and the amount of the contribution; or payroll deduction records. Section 170 provides that contributions of $250 or more can be deducted only if you have an acknowledgment of your contribution from the qualified organization or certain payroll deduction records. If you made more than one contribution of $250 or more, you must have either a separate acknowledgment for each or one acknowledgment that lists each contribution and the date of each contribution and shows your total contributions. Analysis
Issue 1: Based on the forgoing authorities, Mal Manley’s cash contributions of less than $250 cannot be...