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Spending money for charity? Get the charity to sign off

October 13, 2011

When you volunteer with a small tax-exempt organization, sometimes you can find yourself needing to dig into your own pocket to pay for something that the organization needs to do. If the charity doesn't give you a receipt acknowledging your expense, it could cost you at tax time, as a Kentucky woman learned yesterday in Tax Court.

She volunteered to coach a tax-exempt cheerleading team. When the cheerleaders had to rent a bus to get to a competetion, she wrote a check for $660. Rather than getting it reimbursed, she just deducted the expense as a charitable deduction on her schedule A. While she had no trouble convincing the judge that the expense was legitimate, she still couldn't deduct it:

Petitioner contends that she is entitled to a deduction for a $660 contribution she made in order to fund the cheerleading group's bus rental. In support petitioner provided a charter confirmation form and a money order receipt. However, because petitioner's contribution was for an amount greater than $250, she is required to substantiate it by producing a written acknowledgment from the donee organization. See sec. 170(f)(8)(A); see also sec. 1.170A-13(f)(10), Income Tax Regs. Petitioner has failed to present any form of written acknowledgment from the donee organization relating to her contribution. As a result, petitioner's contribution of the $660 charter bus rental fee is not deductible under section 170 as a charitable contribution.

The Moral? If you are out of pocket for the cheerleaders, the cross country team, or the church, and you want a deduction, you need to get a letter from the organization if you spend more than $250. For that matter, you need their letter even if you give them cash.

UPDATE: Loyal reader Eric e-mails:

The Bradley decision reveals another moral equally as important as getting written confirmation for contributions exceeding $250. Readers who are spending less than $250 buying party supplies for their PTO or cookie ingredients for their church can rest easy knowing that writing details on grocery store receipts is adequate substantiation. It was also interesting that the court accepted a spreadsheet for volunteer miles based on Mapquest. For a taxpayer taking on the IRS pro se, Bradley's performance was impressive. The only oddity is why the IRS would flag a $660 deduction from the billions of dollars that are deducted.

Excellent points.

Cite: Bradley, T.C. Summ. Op. 2011-120

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