By Richard R. Hammar, J.D., LL.M., CPA
© Copyright 2001 by Church Law & Tax Report. All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Church Law & Tax Report, PO Box 1098, Matthews, NC 28106. Reference Code: m08 c0103
Tax Court addresses contributions of noncash property. A married couple claimed charitable contribution deductions for cash, clothing, and other household items they donated to their church on their 1998 and 1999 tax returns. They valued their cash donations for each year at about $5,000, and their property donations at $400. Their tax returns were audited, and the IRS concluded that the actual value of the property donated to the church was about $5,000 in 1998 and $3,800 in 1999, and that their cash contributions were only a few hundred dollars in both years. The IRS claimed that the couple grossly understated the value of their property donation so that they would not have to comply with the substantiation requirements that apply to donations of property valued at more than $500 (Form 8283, Section A) and more than $5,000 (a qualified appraisal, and a qualified appraisal summary on Form 8283, Section B). The Tax Court agreed. It concluded that the couple’s tax return preparer deliberately listed their noncash charitable contributions on the returns at less than $500 and inflated the cash contributions to avoid the need for appraisals and written acknowledgments from the church. As a result, the court concluded that the couple was not entitled to any deductions for their noncash contributions for the two years at issue. It allowed a $300 deduction for cash contributions in each year. This case is important for two reasons. First, it illustrates that donors may lose a deduction for contributions of noncash property valued at more than $500 if they fail to complete Form 8283, Section A, and include this form with their tax return. Section A is easy to complete, and does not require a formal appraisal. Second, donors will lose a deduction for noncash property valued at more than $5,000 if they fail to obtain a “qualified appraisal” of the donated property and include an appraisal summary (Form 8283, Section B) with their tax return. Satriana v. Commissioner, T.C. Sum. Op. 2002-84.
No deduction for gift of BMW to pastor, says court. The Tax Court ruled that a church member could not deduct a contribution of a BMW automobile to his pastor, for two reasons. First, the “contribution” was to an individual rather than to a charity, and “such gifts are not deductible as charitable contributions.” Second, the donor failed to obtain a qualified appraisal of the donated car and attach a “qualified appraisal summary” (Form 8283) to his tax return, as is required for any contribution of noncash property (other than publicly traded stock) with a claimed value of more than $5,000. Brown v. Commissioner, T.C. Summary Opinion 2002-91 (2002).