Bags and bags of deductions. To many taxpayers, the deduction for donations of household goods is sort of an extra standard deduction. If the value of non-cash charitable deductions claimed on 1040s were really as high as the deductions claimed, Salvation Army and Goodwill could be in the Fortune 500.
But the tax law doesn’t really have a freebie deduction for contributions of household goods. The IRS explains (item 7):
To claim a deduction for gifts of cash or property worth $250 or more, you must have a written statement from the qualified organization. The statement must show the amount of the cash or a description of any property given. It must also state whether the organization provided any goods or services in exchange for the gift.
A Maryland woman failed to meet this test in Tax Court yesterday. Special Trial Judge Carluzzo takes up the story:
Petitioner claimed a $31,037 charitable contribution deduction on her 2008 return, consisting of $15,340 in cash contributions and $15,697 in noncash contributions. Petitioner claimed a $10,357 charitable contribution deduction on her 2009 return, consisting of $6,490 in cash contributions and $3,867 in noncash contributions.
The cash contribution substantiation was inadequate. The documentation for the non-cash portion wasn’t any better (my emphasis):
With respect to the noncash charitable contributions, petitioner attached a Form 8283 to her 2008 and 2009 return, showing several contributions of property for each year, with each contribution of property valued over $250. To substantiate the contributions, petitioner submitted donation receipts from the Purple Heart, the National Children’s Center, the Lupus Foundation of America, Inc., and the Vietnam Veterans of America. Each of the donation receipts is deficient in one way or another, lacking either a date of contribution or a description of the property contributed, or both. Furthermore, the donation receipts neither reconcile with petitioner’s Form 8283 nor provide anything more than vague descriptions of the items donated.
Every practitioner who has been doing 1040 work for very long has seen things like this — say a round “$2,000″ for, say, “10 bags, clothes — Goodwill.” Or, sometimes, $7,000 (that never works; good luck finding a “qualified appraiser” for your old laundry). No receipts, or maybe an unsigned slip of paper that says “10 bags” from the donee. That doesn’t meet the requirements for a “statement” showing a “description of any property given.” The outcome:
Accordingly, we find that for each year in issue, petitioner has failed to establish entitlement to a charitable contribution deduction for donations of property in greater amounts than those now allowed by respondent.
The Moral? The deduction for household goods is not a freebie. If you are claiming it for over $250, you have to meet documentation requirements similar to those for cash donations. Even if you took pictures of the items before donating them, you lose without the statement from the donee.
The Oregonian reported at the end of February that the Oregon University System had claimed credits under that later deadline, saying that it had already begun work on a $27 million installation of solar arrays across its seven main campuses. And although then-Gov. John Kitzhaber used a golden shovel in a 2011 groundbreaking ceremony, contractor Renewable Energy Development Corp. — known as Redco — had not yet obtained building permits for the project or even finished its design plans, the paper reported.
But the DOE approved credits for the program, apparently relying on invoices from a nonexistent company indicating that it had already begun installing the foundations for solar racks at each of the campuses.
Following the reports, DOE Director Michael Kaplan called on the Oregon Department of Justice to investigate the case.
The program had some things in common with Iowa’s film credit program:
Relatively modest to start, the program grew quickly, with lawmakers approving an ever-growing list of eligible projects, increasing the maximum credit from $2 million to $20 million, removing the overall program cap, and allowing some claimants to transfer their credits.
As the program became more unwieldy and the DOE struggled to administer it, the legislature began winding it down…
This is related to the scandal that forced Governor Kitzhaber to resign. Special industry incentives are inherently corrupt, even if nobody in government is on the take, because they reward insiders at the expense of the body of taxpayers, known genericly as “chumps.” (for you Illinois readers, that’s the same as chumbolones).
More coverage at oregonlive.com: Oregon’s signature solar energy project built on foundation of false hopes and falsehoods
TaxGrrrl, Heart Surgery & Hospital Stays: Deducting Medical Expenses On Your Tax Return. An intrepid tax blogger finds a tax angle in her father’s heart surgery. We wish him a speedy recovery.
William Perez has Concise Guide to Schedule C for all you self-employeds.
Robert Wood, Wesley Snipes Lands NBC Show Endgame. Why His IRS Endgame Failed. “Stay away from crazy arguments.”
Alan Cole, Tom VanAntwerp, Richard Borean, Where Do Americans Take Their Retirement Income? (Tax Policy Blog).
Warm places and lake country, it looks like.
TaxProf, The IRS Scandal, Day 670. This missing email stuff seems to be a pattern.
So what? The Rich Get (Much) Richer Under The Rubio-Lee Tax Plan (Tony Nitti). If it helps everyone else more than any other plan, why is that a problem?
Peter Reilly, Pensacola Shows Little Interest In Kent Hovind Trial
Simon Johnson, Dynamic Scoring Forum: The Dangers of Dynamic Scoring (TaxVox)
Martin Sullivan, “Beep, Beep” — Korean Singer YoonA Wins Model Taxpayer Award (Tax Analysts Blog):
She is one of eight members of the wildly popular band Girls Generation which has recorded such hits as Beep-Beep and Do the Catwalk. And now . . . she is the recipient of a presidential award from the South Korean government for being a dutiful and honest taxpayer who has made a significant financial contribution to her country.
We don’t expect an award, but it would be nice if the IRS would at least send a thank-you note.