Yet Another Denial of a “Valid” Charitable Deduction – Martin v. Commissioner, T.C. Memo 2026-40 (5/14/26)

The Service has made it clear that if a Taxpayer fails to substantiate their charitable contribution with a satisfactory contemporaneous written acknowledgment (CWA), an otherwise valid charitable deduction will be denied. Moreover, the requirements of the CWA are strict, and the courts and the Service apply them as such; the doctrine of substantial compliance does not apply to excuse the failure to obtain a CWA meeting the statutory requirements.

Section 170(f)(8)(A) requires that a contribution of $250 or more be substantiated “by a [CWA] of the contribution by the donee organization.” Under Section 170(f)(8)(B), the CWA must include:

(i) The amount of cash and a description (but not value) of any property other than cash contributed;

(ii) Whether the donee organization provided any goods or services in consideration, in whole or in part, for any property described in clause (i); and

(iii) A description and good faith estimate of the value of any goods or services referred to in clause (ii). . . .

A CWA does not have to take a particular form and may be made up of a series of documents. Martin v. Commissioner, T.C. Memo 2026-40 (5/14/26), is another case in a long line of cases where the Tax Court upheld the denial of a taxpayer’s deduction for failure to comply with the CWA requirement.

In 2018, Taxpayer and a third-party decided to donate real property to Highland City, Utah, and on November 21, 2018, sent the mayor and City Council a letter with the donation offer. After a vote to accept the property, Taxpayer, third-party, and the mayor signed a joint letter dated December 21, 2018, (Joint Letter) stating that Taxpayer and third-party offered “a donation of land” for “[t]he purpose of . . . a conservation contribution” and with the intent for Highland City “to maintain th[e] property in perpetuity as preserved open space.” The Joint Letter went on to state that the property “will be donated” with “all taxes paid and current through the end of 2018” and “all costs associated with said donation . . . paid by the donors.”

On December 27, 2018, Taxpayer and third-party signed a warranty deed (2018 deed) conveying the property to Highland City which was recorded, together with the Joint Letter, on December 28, 2018. The 2018 deed stated that the property was conveyed “for and in consideration of the sum of Ten and no/100 Dollars ($10.00), and other good and valuable consideration in hand paid by” Highland City.

An appraisal valued the property donated at $665,000.  Taxpayer filed a 2018 return claiming a $339,400 charitable contribution deduction — $332,500 of which was attributable to the donation of a 50% interest in the property. Taxpayer, appraiser, and a Highland City Administrator signed Taxpayer’s Form 8283, Noncash Charitable Contributions. The property was identified as a Qualified Conservation Contribution with the description of the property as “Highland Land” and physical condition as “good.” The appraisal was attached to Taxpayer’s income tax return.

The Service issued a Notice of Deficiency disallowing the charitable contribution deduction attributed to the property and determined an accuracy-related penalty for an underpayment of tax required to be shown on a return due to a substantial understatement of income tax.

The Tax Court reviewed the Form 8283, the Joint Letter, and the 2018 deed (collectively, Documents) together to determine if they constituted a CWA.

A.  Property Description

Even though the Documents did not specify that Taxpayer was donating a 50% interest in the property, the Tax Court determined that the Joint Letter identified the property by parcel number, acreage, and description and the 2018 deed contained the legal description of the property.  Moreover, the 2018 deed stated the entire parcel was donated. The Tax Court concluded that Section 170(f)(8)(B)(i) was satisfied.

B.  Donee Consideration and Value

Pursuant to Section 170(f)(8)(B)(ii), the CWA must include an affirmative statement that no consideration was provided for the contribution.

1.  Form 8283

Form 8283 failed to satisfy Section 170(f)(8)(B)(ii) because it did not include a statement that the charity provided no consideration for the donation.

2.  Joint Letter

The Joint Letter includes a statement, inter alia, that the property was a “donation” and a “gift”, but it did not state explicitly that the charity provided no consideration for the donation. The Tax Court concluded that the words “donation” and “gift” do not imply that no consideration, in whole or in part, was provided and do not act as a substitute for an affirmative statement that no consideration was provided. 

3. The 2018 deed

The 2018 deed states that the charity provided $10 “and other good and valuable consideration” for the property. This is the only operative statement in the 2018 deed relating to consideration. 

The Tax Court concluded that the Documents (taken as a whole) did not state the charity provided no consideration and, thus, failed to satisfy Section 170(f)(8)(B)(ii). Thus, the Tax Court denied the Taxpayer’s deduction for failure to substantiate the same with a proper CWA.

Given that complying with the CWA requirements is straightforward, it is unfortunate that Taxpayers continually fail to do so and are denied what would otherwise be valid charitable deductions. In this case, all that stood between the Taxpayer and a significant charitable deduction was one sentence: No goods or services were received in exchange for this donation.