Our
protagonists this time are the Ohdes from West Virginia. The issue concerns
charitable contributions. The Ohdes claimed they made dozens of trips to
Frederick, Maryland and donated over 20,000 distinct items in 2011.
Half of this
would have been clothing. There was furniture. There also were over 3,000
books.
They did at
least get that minimalist Goodwill receipt that says:
Goodwill does not return goods or services in exchange for donations of property.”
The receipt doesn’t
provide detail of the items, their count or their condition, but at least it is
a start.
At the end
of the year they entered this information into TurboTax.
And
according to TurboTax they donated over $146,000.
You know
what else?
They should
have expected the almost-certain notice from the IRS. Donate a piece of real
estate and a $100,000-plus donation makes sense. Donate 20,000-plus items of men’s
and women’s clothing – and not so much.
There are
rules for noncash donations. The IRS knows the scam. The rules tighten-up as
the donations get more expensive.
If you donate property worth $250 or more, you have to get
“contemporaneous written acknowledgement” (CWA). This does not mean the same
day, but it does mean within a reasonable time. The CWA must include a description
of the property. That Goodwill receipt should
be adequate here, as it has pre-printed categories for
· Clothing
· Shoes
· Media
· Furniture
· Household items
Go over $500
and there are more requirements. In addition to a description of the property,
you also have to provide:
· How you acquired it
· When you acquired it
· How much you paid for it
That
Goodwill receipt is no longer enough. You are going to have to supplement it
somehow. Some tax practitioners advise taking photographs and including them
with the tax records for the year.
Go over
$5,000 and you get into appraisal territory, unless you donated publicly-traded
stocks.
Where were
the Ohdes on this spectrum? Their lowest donation was $830; their highest was
$14,999.
They were
therefore dealing with the $500 and $5,000 rules.
What did
they have?
They had
that lean and skinny receipt from Goodwill. You know, the receipt that is good
enough for $250 donations.
But they had
no $250 donations.
They had a
problem. Their paperwork was inadequate. It would help to have a sympathetic
Court.
Here is the
Court:
Petitioners claimed large deductions for charitable contributions of property, not only for 2011 but also for years before and after 2011.”
Where was
the Court going with this?
For 2007—2010 they claimed deductions in the aggregate amount of $292,143 for noncash charitable contributions."
Are you
hearing skepticism?
For 2012-2013 they claimed deductions in the amount of $104,970 for noncash charitable contributions.”
Yep, skepticism.
The Court had
a whole range of options to bounce the deduction.
Petitioners did not maintain contemporaneous records establishing any of these facts.”
That is one
option.
Stay within
the lines and the Court might cut you some slack. Deduct half a million dollars over a few
years and …. Let’s just say you had better make a lot of money to even get to
the realm of possible.
Many of those aggregate dollar figures are suspect on their face.”
The Court
spotted them a $250 deduction.
Leaving
approximately $33 grand in tax and over $6 grand in penalties.
Keep it
believable, folks.
