Martha L. Albrecht

United States Tax Court
T.C. Memo. 2022-53MARTHA L. ALBRECHT,
Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent
—————
Docket No. 13314-20. Filed May 25, 2022.
—————
Gregory W. MacNabb, for petitioner.
Alicia E. Elliott, for respondent.
MEMORANDUM OPINION
GREAVES, Judge: Section 170 1 permits taxpayers to deduct
charitable contributions made during a taxable year, provided certain
substantiation requirements are satisfied. The issue for decision is
whether petitioner satisfied the requirements of section 170(f)(8)(B) for
a charitable contribution she made during 2014 (year at issue). 2 For the
reasons set forth below, we resolve this issue in favor of respondent.
1 Unless otherwise indicated, all statutory references are to the Internal
Revenue Code, Title 26 U.S.C. (Code), in effect at all relevant times, all regulation
references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all
relevant times, and all Rule references are to the Tax Court Rules of Practice and
Procedure.
2 The parties submitted a Stipulation of Settled Issues whereby petitioner
conceded a failure to report a taxable refund of state income taxes of $363 for the year
at issue.
Served 05/25/22
2
[*2] Background
The parties submitted this case for decision without trial under
Rule 122. Relevant facts have been stipulated or otherwise included in
the record. See Rule 122(a). Petitioner resided in New Mexico when she
filed the Petition.
Petitioner and her late husband acquired a large collection of
Native American jewelry and artifacts during their marriage. On or
around December 19, 2014, petitioner donated approximately 120 items
from this collection (donation) to the Wheelwright Museum of the
American Indian (Wheelwright Museum). In connection with the
donation the Wheelwright Museum and petitioner executed a “Deed of
Gift” (deed) dated December 19, 2014, that consisted of five pages. The
first page stated that petitioner “hereby donates the material described
below to the Wheelwright Museum of the American Indian under the
terms stated in the Conditions Governing Gifts to the Wheelwright
Museum of the American Indian.” Immediately under this clause was
the heading “Description of Material: See Attached List.” The first page
also included the museum’s logo, petitioner’s address, and her donor
identification number, as well as the signatures of petitioner and a
museum official.
The second page of the deed was titled “Conditions Governing
Gifts to the Wheelwright Museum of the American Indian” and specified
conditions governing gifts to the museum. One of these conditions
stipulated in relevant part that “the donation is unconditional and
irrevocable; that all rights, titles and interests held by the donor in the
property are included in the donation, unless otherwise stated in the
Gift Agreement.” The final three pages of the deed listed items of
donated property. Despite “the Gift Agreement” reference on the second
page of the deed, no such agreement was included with the deed, and
the Wheelwright Museum did not provide petitioner with any further
written documentation concerning the donation.
Petitioner electronically filed Form 1040, U.S. Individual Income
Tax Return, for the year at issue in which she reported the donation on
Schedule A, Itemized Deductions, and attached a copy of the deed to the
return. Following an examination of petitioner’s 2014 return,
respondent timely issued petitioner a notice of deficiency disallowing the
donation on the ground that the requirements of section 170 were not
met. Petitioner timely sought review in this Court.
3
[*3] Discussion
I. Burden of Proof
In general the Commissioner’s determinations in a notice of
deficiency are presumed correct, and the taxpayer bears the burden of
proving that the determinations are in error. 3 Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933). In addition, the taxpayer bears the
burden of proving entitlement to any deduction claimed. INDOPCO,
Inc. v. Commissioner, 503 U.S. 79, 84 (1992). Thus, a taxpayer claiming
a deduction on a federal income tax return must demonstrate that the
deduction is provided for by statute and must maintain records
sufficient to enable the Commissioner to determine the correct tax
liability. See § 6001; Hradesky v. Commissioner, 65 T.C. 87, 89–90
(1975), aff’d per curiam, 540 F.2d 821 (5th Cir. 1976); Treas. Reg.
§ 1.6001-1(a).
II. Charitable Contributions
A taxpayer may deduct charitable contributions made during the
taxable year. § 170(a)(1). Such deductions are allowable only if the
taxpayer satisfies specific statutory and regulatory substantiation
requirements. See id.; Treas. Reg. § 1.170A-13. For any contribution of
$250 or more, section 170(f)(8)(A) requires that the taxpayer obtain from
the donee organization, and maintain in his files, a “contemporaneous
written acknowledgement” (CWA). 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 such
property; and (iii) a description and good faith estimate of the value of
any such goods or services. § 170(f)(8)(B); 15 W. 17th St. LLC v.
Commissioner, 147 T.C. 557, 563 (2016); Treas. Reg. § 1.170A-13(f)(2).
Furthermore, the taxpayer must receive the CWA from the donee
organization on or before the earlier of the date the taxpayer files his
return or the due date for filing such return. Sec. 170(f)(8)(C).
A CWA is not required to take any particular form but the
requirement that a CWA be obtained “is a strict one.” 15 W. 17th St.
LLC, 147 T.C. at 562; see also Izen v. Commissioner, 148 T.C. 71, 78
3 The burden of proof may shift from the taxpayer to the Commissioner in
certain circumstances under section 7491(a), but petitioner does not allege, nor does
the evidence suggest, that the burden of proof should shift to respondent under section
7491(a) as to any issue of fact.
4
[*4] (2017) (noting that a deed of gift can serve as a de facto CWA). A
taxpayer may not deduct the contribution if the donation
acknowledgment fails to meet these strict demands. See 15 W. 17th St.
LLC, 147 T.C. at 562 (emphasizing that the doctrine of substantial
compliance does not apply for purposes of section 170(f)(8)); see also
Addis v. Commissioner, 374 F.3d 881, 887 (9th Cir. 2004) (“The
deterrence value of . . . [a] total denial of a deduction [in the case of an
improper CWA] comports with the effective administration of a self-
assessment and self-reporting system.”), aff’g 118 T.C. 528 (2002).
The parties do not dispute that petitioner received the deed from
the Wheelwright Museum before filing her return; however, respondent
contends that the deed does not comply with section 170(f)(8)(B) on the
grounds that it did not specify whether the Wheelwright Museum
provided any goods or services in return for the donation or state that it
represented the entire agreement between the museum and petitioner.
Specifically, respondent points out the reference in the deed to the “Gift
Agreement” as creating ambiguity as to whether additional terms,
including donee provision of goods or services, were part of the donation.
The deed does not state whether the Wheelwright Museum
provided any goods or services with respect to the donation. Where a
deed does not contain such an explicit statement, we have previously
looked to the deed as a whole to determine whether the donee provided
goods or services in return for the donation. See, e.g., French v.
Commissioner, T.C. Memo. 2016-53, at *10–12; RP Golf, LLC v.
Commissioner, T.C. Memo. 2012-282, at *10–11; Averyt v.
Commissioner, T.C. Memo. 2012-198, slip op. at 12–13. Specifically, we
have considered whether the deed (i) effectively states whether any
goods or services were provided in the exchange; (ii) states the donation
is an unconditional gift; (iii) recites no consideration received in the
exchange; and (iv) contains a provision stating that the deed is the entire
agreement of the parties. See French, T.C. Memo. 2016-53, at *10–12;
RP Golf, LLC, T.C. Memo. 2012-282, at *10–11; Averyt, T.C. Memo.
2012-198, slip op. at 12–13.
Although the deed in this case provides that the donation was
“unconditional and irrevocable,” it continues that “all rights, titles and
interests held by the donor in the property are included in the donation,
unless otherwise stated in the Gift Agreement.” (Emphasis added.) Thus,
the terms of the deed were subject to a separate agreement, but the
5
[*5] Wheelwright Museum did not provide petitioner with this
document before the return was filed. 4
Petitioner contends that the Gift Agreement is irrelevant to the
issue of whether the Wheelwright Museum provided goods or services in
exchange for the donation because the sole purpose of the Gift
Agreement was to describe the extent to which petitioner retained
certain rights, titles, or interests in the donation. Petitioner also insists
that the Wheelwright Museum’s failure to provide her with a Gift
Agreement “indicates the presumption that all [of] [p]etitioner’s right[s],
title[s] and interest[s] in the donated property [are] included in the
donation.” We do not find these arguments persuasive when construing
the plain text of the deed. By referencing another document that
superseded the terms of the deed with respect to the donor’s rights in
the donation, the deed provided the donor with the ability to retain an
interest in the donation, including under a potential quid pro quo
arrangement.
Petitioner cited no authority for the proposition that a separate
agreement referenced in a deed but unattached thereto creates a
presumption that the deed alone satisfies section 170(f)(8). We are
unwilling to create such a rule, especially when the deed did not indicate
it constituted the entire agreement of the parties or that any prior
discussions, negotiations, or understandings between them were
merged into the deed. When looking exclusively at the deed and
considering it as a whole, it leaves open a significant question about
whether the parties had entered into a side agreement that included
additional, superseding terms. See French, T.C. Memo. 2016-53,
at *10–12 (refusing to uphold as a CWA a deed that, when analyzed as
a whole, did not represent the entire agreement between the donee and
donor).
We appreciate what appears to have been a good faith attempt by
petitioner to substantially comply with the Code by executing the deed
with the Wheelwright Museum. Substantial compliance, unfortunately
for petitioner, does not satisfy the strict requirements of section
170(f)(8)(B). See 15 W. 17th St. LLC, 147 T.C. at 562. Thus, for the
reasons given above, petitioner is not entitled to a charitable
4 The fact that the parties now agree that the Wheelwright Museum did not
provide any consideration as part of the donation is of no consequence. In assessing
whether a taxpayer has strictly complied with section 170(f)(8), the focus is exclusively
on what the taxpayer obtained from the donee organization at the earlier of the time
the return was filed or the filing due date, as discussed supra.
6
[*6] contribution deduction with respect to the donation as the deed does
not satisfy these requirements.
To reflect the foregoing,
Decision will be entered under Rule 155.