IRS and Tax Courts Continue to Target Charitable Contributions

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DonateSeveral 2012 court decisions affirmed IRS denials of
taxpayers’ charitable contributions because they failed to satisfy all the
requirements for deducting them.  These
cases are a reminder to taxpayers and tax preparers alike to follow all
substantiation requirements set out under code Section 170 and the IRS
regulations.  Here is a summary of the
major cases decided in 2012:

  • Durden,
    T.C. Memo. 2012-140:  A deduction for
    cash donations to a church were denied for lack of required
    substantiation.  The first letter from
    the church did not indicate if the donor received anything of value in return
    for his donation, and the second letter was contemporaneous.
  • Patel,
    138 T.C. No. 23 (2012):  A taxpayer gave
    a fire department the right to conduct training exercises on his property and
    burn down the vacant house, and promptly claimed a deduction of $339,504. No
    deduction was allowed per Section 170(f)(3), which denies deduction for partial
    interest in land.  A license to use is
    not a donation of property, and the taxpayer did not transfer title to the fire
  • Mitchell,
    138 T.C. No 16 (2012):  Qualified
    conservation contribution denied due to failure to comply with IRS regulations
    Sec. 1.170A-14(g)(2).
  • Rothman,
    T.C. Memo. 2012-163:  Deduction for a
    historic facade easement was disallowed because of an improper valuation
    method.  Substantial compliance was also
    not available because the appraisal failed to meet a number of other
  • Dunlap,
    T.C. Memo. 2012-126:  Deduction for facade
    easement denied because valuation submitted by experts was not credible.
  • Mohamed,
    T.C. Memo. 2012-152:  Taxpayers donated
    more than $18 million of real estate to charities in 2003 and 2004, but the
    deductions were denied because the taxpayers did not obtain qualified
    appraisals as required by regulations.
  • Cohan,
    T.C. Memo. 2012-8:  Deduction was denied
    because of insufficient verification letter and appraisal.
  • Whitehouse
    Hotel L.P.
    ,139 T.C. No. 13 (2012):  In a 109-page ruling on valuation of qualified
    conservation contributions and application of penalties for overstatement, the
    court found the deduction was overstated and upheld the accuracy-related

These court cases highlight that the IRS is continuing its war on charitable
contributions that I wrote about in my March 1, 2012 blog titled IRS Declares War on Charitable Contributions (  That
blog also has links to the following blogs on how to document charitable
donations and how to win if challenged by the IRS: