DocketNumber： Docket No. 21982-13.
Filed Date： 4/8/2015
Status： Non-Precedential
Modified Date： 4/17/2021
Decision will be entered for respondent.
LAUBER,
Petitioners contend that they donated property during 2011 to four charitable organizations: the Upper Dublin Lutheran Church (Church), Goodwill Industries (Goodwill), the Military Order of the Purple Heart Service Foundation (Purple Heart), and Vietnam Veterans of America (Vietnam Veterans). Petitioners' *73 noncash contributions to the Church consisted of items they allegedly donated to its 2011 annual flea market. These items included books valued at $8,000, household items valued at $1,303, clothing valued at $1,000, toys valued at $822, telescopes valued at $800, jewelry valued at $780, and household furniture valued at $410, for a total of $13,115.
Petitioners did not produce a receipt or an acknowledgment from the Church for their donations of any of these items. The Church was evidently equipped to provide such receipts, because petitioners claimed to have a receipt2015 Tax Ct. Memo LEXIS 77">*79 from the Church for their contributions to the 2012 flea market. Petitioners produced no evidence, such as photographs, that any of the listed items were actually delivered to the Church. The Church did not inform petitioners whether any of the items allegedly contributed were sold or at what price.
Petitioners' noncash contributions to Goodwill, Purple Heart, and Vietnam Veterans allegedly consisted of clothing valued at $20,920, household furniture valued at $2,680, household items valued at $350, and toys valued at $250, for a total of $24,200. Petitioners produced no documentary evidence, and had no recollection, as to which items were donated to which charity. They produced a spreadsheet, created during the IRS audit, that listed various items--e.g., 67 blouses, 45 dresses, 70 dress shirts, 22 dress coats, and 100 baby outfits--and *74 assigned "estimated amounts" as the fair market values of these items. Petitioners contended that these items, in the aggregate, were divided in some manner among the three charities.
For Goodwill, petitioners testified that they took batches of items at various times to a Goodwill location. They generally made these trips in the early morning or evening,2015 Tax Ct. Memo LEXIS 77">*80 when the Goodwill warehouse was unattended. They placed soft goods in large bins intended for after-hours dropoffs. They left large items, such as furniture, outside the warehouse door. Petitioners testified that they were careful to ensure that the items in each batch were worth less than $250 because they thought this eliminated the need to get receipts.
For Purple Heart and Vietnam Veterans, petitioners allegedly scheduled a pickup and left the items outside their house. The charity sent a truck to pick up the items, generally while petitioners were away, and usually left a doorknob hanger saying, "Thank you for your contribution." These doorknob hangers contained no other information. They were undated; they were not specific to petitioners; and they did not list or describe the property contributed.
Petitioners testified that they created index cards recording the items as they were delivered to Goodwill or left for pickup by Purple Heart or Vietnam Veterans. Petitioners later aggregated this information into a master list. When the time *75 came to prepare their 2011 tax return, they assigned estimated values to the items. Petitioners did not introduce into evidence the index cards2015 Tax Ct. Memo LEXIS 77">*81 they allegedly prepared or any other contemporaneous records supporting their contention that they made the alleged gifts. They supplied no evidence concerning their cost bases in these items or the manner in which they determined fair market values.
The IRS timely issued petitioners a notice of deficiency disallowing for lack of substantiation $300 of their claimed cash contributions and all of their claimed noncash contributions totaling $37,315. The IRS also determined an accuracy-related penalty. Petitioners timely sought review in this Court.
The Commissioner's determinations in a notice of deficiency are generally presumed correct, and the taxpayer bears the burden of proving those determinations erroneous.
For all contributions of $250 or more, the taxpayer generally must obtain a contemporaneous written acknowledgment from the donee.
Additional substantiation requirements are imposed for contributions of property with a claimed value exceeding $500.
Petitioners contend that they donated property in 2011 with an aggregate value of $37,315. The property they allegedly contributed may be grouped into the following seven categories:
| Clothing | $21,920 |
| Books | 8,000 |
| Household furniture | 3,090 |
| Household items | 1,653 |
| Toys | 1,072 |
| Telescopes | 800 |
| Jewelry | |
| Total | 37,315 |
*78 Petitioners do not meaningfully challenge this categorization of their alleged gifts,2015 Tax Ct. Memo LEXIS 77">*84 and each category has a claimed value exceeding $500. Therefore, in addition to meeting the general substantiation requirements of
Petitioners did not provide to the IRS or the Court a "contemporaneous written acknowledgment" from any of the four charitable organizations. Petitioners produced no acknowledgment of any kind from the Church or Goodwill. And the doorknob hangers left by the truck drivers from Vietnam Veterans and Purple Heart clearly do not satisfy the regulatory requirements. These doorknob hangers are undated; they are not specific to petitioners; they do not describe the property2015 Tax Ct. Memo LEXIS 77">*86 contributed; and they contain none of the other required information.
Petitioners contend that they did not need to get written acknowledgments because they made all of their contributions in batches worth less than $250. We *80 did not find this testimony credible. Petitioners allegedly donated property worth $13,115 to the Church; this donation occurred in conjunction with a single event, the Church's annual flea market. Petitioners' testimony that they intentionally made all other contributions in batches worth less than $250 requires the assumption that they made these donations, with an alleged value of $24,200, on 97 distinct occasions. This assumption is implausible and has no support in the record. Moreover, petitioners testified that they did not assign values to the donated items until they prepared their tax return in 2012. That being so, it is hard to see how they could have ensured, at the time they contributed the property, that each individual batch was worth less than $250.2015 Tax Ct. Memo LEXIS 77">*87
*81 For these reasons, we conclude that petitioners were required to obtain, but did not obtain, contemporaneous written acknowledgments for their contributions of property during 2011. Their claimed deductions2015 Tax Ct. Memo LEXIS 77">*88 must accordingly be denied for lack of substantiation under
Although petitioners' failure to satisfy the substantiation requirements for contributions of $250 or more is fatal to their claim, we will briefly address, for sake of completeness, the other applicable substantiation requirements. For noncash contributions in excess of $500, taxpayers are required to maintain additional reliable written records with respect to each item of donated property.
*82 Petitioners allegedly made noncash contributions to four different charities of seven categories of items, each with a claimed value exceeding $500. But they did not maintain written records establishing when or how these items were acquired or what their cost bases were. Nor did petitioners2015 Tax Ct. Memo LEXIS 77">*89 maintain written records establishing how they calculated the items' fair market value.
No deduction is allowed for "any contribution of clothing or a household item" unless such property is "in good used condition or better."
*83 The Court has no doubt that petitioners did donate some property to charitable organizations during 2011. But the Code imposes a series of increasingly rigorous substantiation requirements for larger gifts, especially when they consist of property rather than cash. Because petitioners did not satisfy these requirements, we are unable to allow a deduction for their claimed noncash gifts.
With respect to an individual taxpayer's liability for a penalty,
Petitioners testified as to their belief that they did not need to obtain receipts or acknowledgment letters because they left donations at2015 Tax Ct. Memo LEXIS 77">*92 unattended dropoff locations and because each batch of items they delivered or left for pickup was worth *85 less than $250. As noted earlier, we were unpersuaded by this testimony. These rationales have no application to petitioners' alleged donation of property worth $13,115 to the Church. Their testimony that they intentionally made all other contributions in batches worth less than $250 requires the implausible assumption that they made these donations on 97 distinct occasions. In any event, petitioners failed to keep reliable written records of their gifts because they did not record the dates of any of their contributions; they did not record which items were donated to which charity; and they did not record how they determined the fair market values of any items.
In sum, we find that petitioners were negligent in preparing their 2011 return and that no portion of their 2011 underpayment met the "reasonable cause" exception. We will accordingly sustain respondent's imposition of the
To reflect the foregoing,
1. All statutory references are to the Internal Revenue Code (Code) as in effect for the tax year at issue. All Rule references are to the Tax Court Rules of Practice and Procedure. We round all dollar amounts to the nearest dollar.↩
2. Petitioners argue that not all textbooks should be aggregated because "a Pharmacology textbook is not similar to a Spanish textbook." We disagree. The regulations define "similar items of property" as "property of the same generic category or type."
3. Petitioners argue that they were unaware of the requirement to aggregate property. But they testified that they relied on IRS Publication 526, Charitable Contributions, in preparing their 2011 return. That publication specifically instructs taxpayers that, "[i]n figuring whether your deduction is $500 or more, [you must] combine your claimed deductions for all similar items of property donated to any charitable organization during the year."↩
4. Even if petitioners could be excused from the "contemporaneous written acknowledgment" requirement on the theory that they made all gifts in batches worth less than $250, they were still required to maintain records to document their donations, which generally must include "receipts" from the donees.
5. For contributions of property (other than publicly traded securities) or similar items of property valued over $5,000, the taxpayer must generally satisfy the substantiation requirements discussed in the text and must also: (1) obtain a "qualified appraisal" of the items; and (2) attach to his tax return a fully completed appraisal summary.