The proposed regs also state that the substantiation (whether it’s a bank record or donee acknowledgment) must received contemporaneously by the taxpayer – same as the substantiation requirement for gifts of $250 and greater.

This is all in Proposed Reg. §1.170A-15, by the way.

If you have a bank record you don’t need a written acknowledgment. If you don’t have a bank record, you need the written acknowledgment (i.e., a receipt) with charity name, date of donation, and amount of donation. So for true cash gifts, you’re going to need the written acknowledgment, since there’s no bank record in that case.

There is no mention in the statute of a requirement that either the bank record or the written acknowledgment be contemporaneous. The old regulations (§1.170A-13) mention contemporaneousness (is that a word?) as one indicator of the reliability of “other written records”, but that standard was thrown out by the change in the law.

I suppose a bank record would tend to be contemporaneous by its nature, but I think the following scenario would be technically OK under the new rules: individual makes a series of $249 cash donations to a charity in 2008, files his tax return on March 1, 2009, but doesn’t get a receipt/acknowledgment until sometime in July of 2009. Stretch it a bit further – taxpayer doesn’t get a receipt until he’s audited in August 2011 and he brings the receipt, with a date of August 2011, to the audit. In my mind, that works since the only requirement is that the taxpayer “maintain a record” of the contribution.

Still haven’t seen anything from the IRS defining a “bank record”. They have come out with notices saying that W-2s, payroll stubs, and pledge cards for United Way and other donations through payroll deductions count as written acknowledgments from the donee.

Anyway, that’s enough far-fetched theoretical junk for one day.

BTW, odd ‘war story’ about offering plates… In our neck of the woods in NC, there was an usher who would count and collect the cash every Sunday and after the amount was verified, would make the deposit for the church. Nobody questioned it (the dollar amounts were correct) until he was audited… He was keeping the cash, writing a check out to the church for the full amount for the entire congregation collection plate and then taking the full amount as a deduction on his personal return. Clever, but it ultimately caught up to him.

There’s at least one case that was technically right on the letter of the law where the taxpayer got hosed by the $250+ substantiation requirement (Gomez, TC Summary 2008-93, 7/30/08) – everyone agreed the taxpayer had made the contributions and that the recipient was a bona-fide 501(c)(3) – but the charity (a church) didn’t issue a receipt with the “magic language” required by §170(f)(8)(B) until after the return was filed. Voila! – no deduction.

It’s not a big step from this case to a fact pattern where somebody puts $50 or even $20 in the plate every Sunday, everybody knows he does it and sees him do it every Sunday, but he lacks a record or acknowledgment meeting the requirements of §170(f)(17) and the deduction is denied. BTW, my reading of the statute is that there’s no contemporaneous requirement here like there is for the $250+ receipt, would you agree?

As an aside, on the question of gifts to a church for a needy family, that’s another extremely thorny issue, especially where the church basically acts as a conduit to make deductible what would not be deductible if given directly to the family. I’ve had plenty of experiences as a preacher’s wife where several people approached my wife, identifying a particular family that was in need, and then gave my wife or the church secretary either cash or a check made out to the church with a note that it was for X person or X family. In those situations, if I was present for my conversation, I had to put my hands over my ears and sing “la-la-la-la-la-la-la, I can’t hear any of this” in order to preserve my sanity.

Thanks!

I looked closer in the Tax Code itself and did indeed find IRC 170(f)(17) -

“(17) Recordkeeping
No deduction shall be allowed under subsection (a) for any contribution of a cash, check, or other monetary gift unless the donor maintains as a record of such contribution a bank record or a written communication from the donee showing the name of the donee organization, the date of the contribution, and the amount of the contribution.”

Thanks again.

TWTP

H.R. 4, Subtitle B, Part I, SEC. 1217. MODIFICATION OF RECORDKEEPING REQUIREMENTS FOR
CERTAIN CHARITABLE CONTRIBUTIONS.
(a) RECORDKEEPINGREQUIREMENT.—Subsection (f) of section 170, as amended by this Act, is amended by adding at the end the following new paragraph:
‘‘(17) RECORDKEEPING.—No deduction shall be allowed under subsection (a) for any contribution of a cash, check, or other monetary gift unless the donor maintains as a record of such contribution a bank record or a written communication from the donee showing the name of the donee organization, the date of the contribution, and the amount of the contribution.’’.
(b) EFFECTIVEDATE.—The amendment made by this section shall apply to contributions made in taxable years beginning after the date of the enactment of this Act.

Is the actual charitable contribution of cash without documentation forbidden in the Tax Code (as amended) – specifically stating that in order to be deductible there must be documentation – or is the new law that the taxpayer must provide adequate documentationto the IRS in the event of an audit?

I haven’t had a chance to actually read the specific Code myself.

Just curious.

Thanks!

TWTP