Tax Court Reminds Taxpayers About Documents Needed to Establish a Charitable Contribution Deduction
By Joel N. Crouch on March 13, 2025
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Joel N. Crouch
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In a recent collection due process (CDP) case, Cade v. Commissioner, T.C. Memo 2025-20, the Tax Court reminded taxpayers what is required to establish a charitable contribution deduction. In Cade, the taxpayers filed their 2019 Form 1040 showing a balance due of $89,013, which they did not pay. In response to IRS collection action, the taxpayers filed a CDP request. During the CDP hearing, the taxpayers contended they had filed an amended 2019 Form 1040 which included a charitable contribution deduction of $284,553 that they overlooked on their original 2019 Form 1040. The taxpayers said that if the additional charitable deduction was allowed, the tax liability would be eliminated and they would be entitled to a refund for the 2019 tax year.
The rules and requirements of a charitable donation deduction are set forth in IRC Section 170 and the related regulations. Charitable donations must be supported by adequate documentation-the higher the claimed donation value, the more documentation is required under IRC Section 170(f). For donations greater than $5,000, a taxpayer must obtain a “qualified appraisal” from a “qualified appraiser,” both of which are defined in Section 170(f). In addition, the taxpayer must obtain a contemporaneous written acknowledgement (CWA) of their donation on or before the earlier of either (1) the date on which the taxpayer files a return for the taxable year in which the contribution was made, or (2) the due date (including extensions) for filing such a return.
The Cades contended that they were entitled to additional deductions for contributions of items to the Victory Christian Church in Albany, New York, which the court said fell into three categories:
- Petitioners claimed a deduction of $146,043 for the donation of personal clothing items. These items allegedly consisted of 2,253 “spring jackets” and 1,212 “short sleeve coveralls.” Petitioners reportedly acquired these items in June 2015 at a cost of $2,250. As of December 2019, they asserted that the “spring jackets” were worth $39 apiece (for a total of $87,867) and that the “short sleeve coveralls” were worth $48 apiece (for a total of $58,176)
- Petitioners claimed a deduction of $89,100 for the donation of 16,200 “granite cobblestones of various sizes.” Petitioners reportedly acquired these items in May 2013 at a total cost of $1,000. As of December 2019, they asserted that the 16,200 cobblestones were worth $5.50 apiece (for a total of $89,100).
- Petitioners claimed a deduction of $49,410 for the donation of 9,608 pieces of commercial vinyl tile and 10 four-gallon tubs of floor-tile adhesive. Petitioners reportedly acquired these items in January 2016 at a cost of $1,080. As of December 2019, they asserted that the vinyl tile was worth $4.75 per square foot (for a [*4] total of $45,638) and that the adhesive was worth $435 per tub (for a total of $4,350).
The amended return included separate and complete Forms 8283, Noncash Charitable Contributions for each of the three categories of donated items.
As part of the CDP process, the amended tax return was assigned to the IRS Examination Division for review. The IRS Examination Division requested copies of the CWAs and the “qualified appraisals”. The taxpayers responded with copies of the three Forms 8283 stating that “the forms are acknowledged by the receiving party and signed by the appraiser of the respective gifted property.” The Examination Division notified the IRS Appeals Officer who was handling the taxpayers’ CDP request that the charitable contribution deduction should be disallowed because the taxpayers failed to provide the documents required under Section 170. The Appeals Officer contacted the taxpayers’ representative and made a second request for the CWAs, qualified appraisals and information to establish that the appraisers were “qualified” as defined by IRC Section 170. The taxpayers ultimately provided letters from each of the appraisers regarding job experience and CWAs from the church with illegible signatures and no indication of name or title of the signor. Shortly thereafter the IRS Appeals Office denied the taxpayers’ CDP request in response to which the taxpayers filed a Tax Court petition alleging that the IRS erred in disallowing their charitable contribution deduction of $284,533 for 2019.
In the Tax Court case, the IRS filed a motion for summary judgment contending that the claimed deduction was properly disallowed because petitioners failed to satisfy the statutory verification requirements for noncash charitable contributions. In response the taxpayers “urged that they complied with the requirements” or in the alternative, “any failure to comply was not fatal to allowance of a deduction because such failure was due to reasonable cause and not willful neglect.”
The court held for the government on the motion for summary judgment on the taxpayers’ failure to secure the required appraisals from qualified appraisers, saying, “we agree with the IRS that petitioners failed to obtain qualified appraisals for their gifts-indeed, they failed to secure in a timely fashion any appraisal at all.” However, although the court called into question the validity and timing of the CWAs, it said there were still factual determinations regarding whether the CWAs were valid and whether the taxpayers’ failure to obtain appraisals was due to reasonable cause.
If you have any questions about this article or any civil or criminal tax matter, please contact me at (214) 749-2456.
As part of the CDP process, the amended tax return was assigned to the IRS Examination Division for review. The IRS Examination Division requested copies of the CWAs and the “qualified appraisals”. The taxpayers responded with copies of the three Forms 8283 stating that “the forms are acknowledged by the receiving party and signed by the appraiser of the respective gifted property.” The Examination Division notified the IRS Appeals Officer who was handling the taxpayers’ CDP request that the charitable contribution deduction should be disallowed because the taxpayers failed to provide the documents required under Section 170. The Appeals Officer contacted the taxpayers’ representative and made a second request for the CWAs, qualified appraisals and information to establish that the appraisers were “qualified” as defined by IRC Section 170. The taxpayers ultimately provided letters from each of the appraisers regarding job experience and CWAs from the church with illegible signatures and no indication of name or title of the signor. Shortly thereafter the IRS Appeals Office denied the taxpayers’ CDP request in response to which the taxpayers filed a Tax Court petition alleging that the IRS erred in disallowing their charitable contribution deduction of $284,533 for 2019.
In the Tax Court case, the IRS filed a motion for summary judgment contending that the claimed deduction was properly disallowed because petitioners failed to satisfy the statutory verification requirements for noncash charitable contributions. In response the taxpayers “urged that they complied with the requirements” or in the alternative, “any failure to comply was not fatal to allowance of a deduction because such failure was due to reasonable cause and not willful neglect.”
The court held for the government on the motion for summary judgment on the taxpayers’ failure to secure the required appraisals from qualified appraisers, saying, “we agree with the IRS that petitioners failed to obtain qualified appraisals for their gifts-indeed, they failed to secure in a timely fashion any appraisal at all.” However, although the court called into question the validity and timing of the CWAs, it said there were still factual determinations regarding whether the CWAs were valid and whether the taxpayers’ failure to obtain appraisals was due to reasonable cause.
If you have any questions about this article or any civil or criminal tax matter, please contact me at (214) 749-2456.
