The Tax Court was not in a charitable mood today. Five cases dealing with charitable deductions, all from Pennsylvania, were decided. In all of them, the petitioners were unable to provide proof of the donations and they all lost their cases.
As the Court has stated numerous times, “Deductions are strictly a matter of legislative grace and the taxpayer bears the burden of proving entitlement to the claimed deduction. Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).” The Court then states the rules for charitable donations:
Deductions for charitable contributions are allowable only if verified under regulations prescribed by the Secretary. Sec. 170(a)(1). In general, the regulations require a taxpayer to maintain for each contribution of money one of the following: (1) A canceled check; (2) a receipt from the donee; or, in the absence of a check or receipt, (3) other reliable written records. Sec. 1.170A-13(a)(1), Income Tax Regs. Where it is impractical to obtain a receipt, taxpayers must maintain other written records indicating the name and address of the donee, the date and location of the donation, a description of the property, and its fair market value at the time the contribution was made. Id.; sec. 1.170A-13(b)(2)(ii), Income Tax Regs.
In all of these cases, the petitioners supposedly made the donations in cash and had no receipts or other written records that the Court would accept. So the donations were disallowed. To add insult to injury, most of the petitioners had to pay an accuracy-related penalty.
Cases:
Lewis v. Commissioner, T.C. Summary 2006-140
Harrell v. Commissioner, T.C. Summary 2006-141
Warren v. Commissioner, T.C. Summary 2006-142
Muhammad v. Commissioner, T.C. Summary 2006-144
Warfield v. Commissioner, T.C. Summary 2006-145