Mastering Charitable Contribution Deduction Rules and Completing Form 8283

Description

For most taxpayers, claiming a tax deduction for charitable contributions is a fairly straightforward process: taxpayer makes a donation, receives a letter thanking them for their contribution, and they provide the acknowledgments to their accountant and claim the deduction. 

However, for many taxpayers, the process is more complicated: What if the taxpayer doesn’t receive a qualifying acknowledgment from the charity? The IRS utilizes a mechanical test: taxpayers must be able to prove they made the claimed contribution and they must provide qualifying substantiation for the deduction to withstand audit scrutiny. There are a number of tax court cases where the IRS has audited a taxpayer and because the acknowledgment did not have the required language, the IRS disallowed the deduction, even though the taxpayer made the contribution.

There are also separate rules and thresholds for valuation and appraisal requirements. The IRS can disallow a charitable deduction claim, even if the taxpayer contributed goods to a charity, if the taxpayer fails to provide a qualified appraisal, for example.

Taxpayers who own stock in partnerships or closely-held corporations and wish to contribute the stock to an exempt organization in advance of a sale event must also be careful of the timing of any gift. Under the anticipatory assignment of income doctrine (AAOI), a taxpayer who donates shares when a sale is already mostly completed must recognize and pay tax on sale gain prior to receiving a charitable contribution deduction.

Our expert panel will discuss the various substantiation and timing requirements, and provide detailed guidance in completing some of the more challenging sections of IRS Form 8283.