Charitable Giving- The Need to Document EACH Gift

Take-Away: Once in a while a court case comes to my attention that makes me break out in a sweat. Such was the recent Tax Court decision that puts all donors on notice that timely and proper documentation is required to be able to claim a federal income tax charitable deduction.

Background: For charitable tax donations that exceed $500 in value, written records are required to establish the item’s manner of acquisition, the date of acquisition or the date the property was substantially completed, and the cost or other basis (adjusted as per IRC 1016.) For contributions of $250 or greater, donors must obtain a contemporaneous written acknowledgment that includes whether any goods or services were provided in return and an adequate description of the donated items. For the gift of noncash items to charities greater than $500 the donor must also complete and file Form 8283. For charitable contributions of $5,000 or greater a qualified appraisal must also be submitted. In short, much more is involved in claiming a charitable income tax deduction than just waving a cancelled check in front of the IRS. Consider what just happened in the federal court system.

Besaw v. Commissioner, U.S. Tax Court Summary Opinion, 2025-7, No. 19222-22S (June 21, 2025)

Facts: In April 2020, John Besaw and his wife filed their 2019 joint income tax return. The on their tax return they claimed a $6,760 charitable deduction for noncash charitable contributions in 2019. To substantiate their charitable contributions John filed Form 8283 with their income tax return. This Form, ‘Noncash Charitable Contributions’, along with continuation sheets, identified each charitable organization donee by name and address, and it provided short descriptions of each of the Besaws’ charitable donations. However, their Form 8283 was incomplete in that it lacked dates and the values of their donations. In 2019, while the IRS was examining the Besaw’s tax return, John then produced additional documentation to substantiate their claimed charitable tax deductions, including dated and signed receipts from each of the charitable organizations. However, those receipts themselves did not identify the specific items donated and their values at the time of the gift. Then, in 2022, John provided the IRS with, yet another document titled “2019 Reconstructed from Form 8283 and Continuation Sheet” that included the name of each charitable organization, dates of each donation, descriptions of the donated items and their values. John reasonable thought, then, that the IRS should be satisfied with documenting the charitable gifts. Not so fast, John.

Notice of Deficiency: Despite all of John’s efforts to fully inform the IRS about the 2019 charitable gifts, the IRS nonetheless issued a Notice of Deficiency in 2022 disallowing the $6,760 in charitable contribution deductions, noting  the absence on Form 8283 of the name and address of the qualifying charitable organizations, a list of what was item was donated to each charity, and the fair market value of each item on the date of the contribution. According to the IRS, these omissions on Form 8283 warranted the Notice of Deficiency. The Besaws then filed a petition in the Tax Court to allow their charitable income tax deduction for 2019.

Tax Court: The Tax Court held that the Besaws were not entitled to claim a charitable contribution deduction on their 2019 income tax return.

Presumption of Validity of Notice: The Tax Court started its analysis noting that the law requires that a Notice of Deficiency is presumed correct, thus shifting to the Besaws the burden of proof that the IRS’s determination is in error. “Deductions are a matter of legislative grace, and the taxpayer bears the burden of proving entitlement to any claimed deduction.”

Duty to Maintain Records: The Court then noted that ‘taxpayers are required to maintain records sufficient to enable the Commissioner to determine the correct tax liability, substantiating both the amount and purpose of the related expense.”  [IRC 6001.]

Regulations: The Besaws argued that the statutory requirement for noncash charitable contribution deductions only mandated the name and address of the charitable donee organization and a description of the donated property, but it did not require the value of each of the donated items. The IRS responded that a charitable deduction is only allowed only if the donor satisfies the specific statutory and regulatory substantiation requirements.

The Regulations require for non-cash donations a receipt showing the name of the charitable organization, date and location of the contribution, and a detailed description o the donation, and while the fair market value of the property is a factor in determining the detail needed, such value does not need to be stated on the receipt itself. [Regulation 1.170A-13(b)(1)(iii).]

However, the Tax Court denied the charitable deduction by the Besaws, despite believing that they had made the donations to charities. The Court noted that the charitable donation receipts provided by the Besaws failed to specifically identify the donated items and their values. Furthermore, the Besaws’ attempt to rectify the omission with the reconstructed documents in 2022 was insufficient as it was not contemporaneous.

Court of Appeals: This Court affirmed the Tax Court’s decision. It did not find error in the determination that the Besaws failed to produce sufficient evidence to demonstrate their entitlement to the charitable deductions.

Conclusion: Any individual who claims a charitable deduction must comply with all of the reporting and disclosure requirements. Proper documentation is more than just a recommendation; it is a requirement. While the Tax Court’s decision acknowledged that it believed that the Besaws had made the charitable donations, it nonetheless disallowed their entire deduction due to the incomplete charity receipts. The Regulations must be followed as much as the statutes that authorize charitable deductions. Even undisputed charitable giving provides not tax benefit without meticulous documentation, and despite the best efforts of the donor to be transparent with the IRS.

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