Strict Substantiation Rules Govern Property Donations to Charity

Check the recent Tax Court decision in the Smith case (TC Memo 2014-203) before you get too cavalier with your tax documentation.

This chap donated about $27,000 (according to him) worth of household goods, clothing and electronic equipment in 2009 to a legitimate charity, the fact of which was not challenged.  The IRS and the Court, however, rendered none of the donations tax deductible because the taxpayer flunked the charitable contribution substantiation tests.

Despite the fact that the taxpayer had consulted a Salvation Army website which revealed estimated “low” and “high” values for used property, he nonetheless assigned values to his items which were considerably higher than the “high” values listed, and he did not take photographs of any of the items donated, nor did he introduce any evidence to establish their condition.

For noncash contributions in excess of $500, taxpayers are required to maintain written records with respect to each item of donated property, to include:

  • The approximate date the property was acquired and the manner of acquisition
  • A description of the property
  • The cost or other basis of the property
  • The fair market value of the property at the time it was contributed
  • The method used in determining the fair market value

No deduction is allowed for contributions of clothing or household goods unless such items are “in good used condition or better.”