cash contribution deduction

[AuditorTurnedGood]

All,
Just read about a court case from last summer we all should be aware of. The taxpayers donated $6,500 to church, had all the cancelled checks, and got written acknowledgement from the church for the contributions. The letter from the church, though, was done in 2008 for the 2005 contributions. The IRS denied the deduction, and the tax court upheld IRS's position, because the letter was late and therefore not contemporaneous with the contributions. Expensive technicality.

[Zee]

All,
Just read about a court case from last summer we all should be aware of. The taxpayers donated $6,500 to church, had all the cancelled checks, and got written acknowledgement from the church for the contributions. The letter from the church, though, was done in 2008 for the 2005 contributions. The IRS denied the deduction, and the tax court upheld IRS's position, because the letter was late and therefore not contemporaneous with the contributions. Expensive technicality.

Wow! That's disturbing. Can you provide a cite to the TC case. I'd like a copy in my files.

[AuditorTurnedGood]

The cite is

Gomez, TC Summary 2008-93. I was a little disgusted as well, but I guess the judge was a strict letter of the law kind of guy (or gal).

[JohnH]

Thanks for the cite. The last time I explained this to someone, they looked at me like I had a third eye. I'm sending this to a couple of people for some light reading.

[New York Enrolled Agent]

Gomez, TC Summary 2008-93. I was a little disgusted as well, but I guess the judge was a strict letter of the law kind of guy (or gal).

Judge Vasquez is an extremely fair and pro-taxpayer type of judge.

All practitioners need to know the Tax Court is often referred to as a court of law and not a court of equity. Congress writes the Internal Revenue Code. §170(f)(8) is explicit and clear. Judges in the Tax Court administer the law as written. We can all feel sorry for the taxpayer but judges in the Tax Court can't ignore the law because they feel sympathy for the taxpayer. The same thing happens all the time with §274(d) - no records - no deduction.

[Zee]

Judge Vasquez is an extremely fair and pro-taxpayer type of judge.

All practitioners need to know the Tax Court is often referred to as a court of law and not a court of equity. Congress writes the Internal Revenue Code. §170(f)(8) is explicit and clear. Judges in the Tax Court administer the law as written. We can all feel sorry for the taxpayer but judges in the Tax Court can't ignore the law because they feel sympathy for the taxpayer. The same thing happens all the time with §274(d) - no records - no deduction.

Good point! However, what about the taxpayer whose "contemporaneous" record is destroyed by a house fire, hurricane, or other Act of God (not the situation in this case)? Common sense would indicate those situations would require an exception. Are you saying the judge cannot allow exceptions? Frankly, I'm surprised the auditor wouldn't accept the substitute form before this reached the tax courts.

[travis bickle]

I do not understand your post

. . . . Frankly, I'm surprised the auditor wouldn't accept the substitute form before this reached the tax courts.

Frankly, I would rather deal with an auditor who deals with the issues IAW the appropriate laws and regulations in effect -- at least that way I know what I can expect when dealing with that individual.

Or, maybe you believe that it is better for auditors to make their decisions willy-nilly so that when we deal with them we have no idea what to expect?

[JohnH]

Maybe, maybe not. In the past I'd have agreed with you, but this is a new day. It seems that the new standard for Supreme Court Justices is "empathy", so if it applies to the highest court in the land, why shouldn't it apply to auditors?

[Zee]

Frankly, I would rather deal with an auditor who deals with the issues IAW the appropriate laws and regulations in effect -- at least that way I know what I can expect when dealing with that individual.

Or, maybe you believe that it is better for auditors to make their decisions willy-nilly so that when we deal with them we have no idea what to expect?

The tone of your response is a little rude, don't you think?

Yes, I would be surprised if an auditor didn't "pass" on an adjustment in this situation. Auditor's have allowed taxpayers to recreate mileage logs, which are supposed to be "contemporaneous" also, haven't they?

The world isn't "black & white". Judges and auditors have recognized this in other situations and interpretations. Again, what if we changed the fact to a loss of the record due to a fire or other Act of God? Should the deduction still have been disallowed?

The point is this case can be used to emphasize to our clients how important it is to follow the law closely with expenses, contributions, etc., and other seemingly simple matters.

[AuditorTurnedGood]

I agree

that the job of a tax court judge is to apply the law to a given situation, not to create policy from the bench. However, the outcome here seems a little extreme. I suppose, the thing I'm most concerned about here is that the spirit of the law regarding contributions and the letter of the law regarding documentation seem so at odds with each other, and the fact this is one of the few truely black and white pieces of the Code. Add this decision to the need to know document every single dollar donated in cash, it makes me wonder - would the government prefer we quit donating money all together?

[travis bickle]

Are you sure of your position?

that the job of a tax court judge is to apply the law to a given situation, not to create policy from the bench. However, the outcome here seems a little extreme. [my emphases]. I suppose, the thing I'm most concerned about here is that the spirit of the law regarding contributions and the letter of the law regarding documentation seem so at odds with each other, and the fact this is one of the few truely black and white pieces of the Code. Add this decision to the need to know document every single dollar donated in cash, it makes me wonder - would the government prefer we quit donating money all together?

The way I read you, you seem to be saying "The judge has to uphold the law, not make it, but I do not like/prefer this result.

Tell me, would you REALLY have rather that the judge said, "I know and understand what the law says, but I am going to ignore it."

You may like that sort of system, but to me that is pure caprice. Everything is therefore up for grabs.

Enjoy citing the regs, TC, etc at your next audit.

[travis bickle]

Actually, no I don't

The tone of your response is a little rude, don't you think?. . . .

I would call it a little "sharp" -- and my intention is to encourage people to think through what the logical result of their position could well be.

[Zee]

I would call it a little "sharp" -- and my intention is to encourage people to think through what the logical result of their position could well be.

There are more polite ways to convey "intent" without offending others, your response isn't "Sharp". "Sharp" conveys the message that you're logic or reasoning is superior to others. It isn't. At best, it's sarcasm.

It's also your opinion. Of course, you have the right to your opinion.

So, what's your opinion on what an auditor/judge should do when the taxpayer's home is destroyed by an Act of God in the same situation? IYHO, Should the deduction be disallowed because there is no evidence available of a contemporaneous contribution (other than the church's new statement)?

Yes, I would rather have the judge say, "I know and understand what the law says, but will allow an exception based on your circumstances, the post-dated documentation & other documentation you provided, and satisfactory evidence of the validity of the deduction."

Have a nice day.

[travis bickle]

And my dog really did eat my homework

There are more polite ways to convey "intent" without offending others, your response isn't "Sharp". "Sharp" conveys the message that you're logic or reasoning is superior to others. It isn't. At best, it's sarcasm.

It's also your opinion. Of course, you have the right to your opinion.

So, what's your opinion on what an auditor/judge should do when the taxpayer's home is destroyed by an Act of God in the same situation? IYHO, Should the deduction be disallowed because there is no evidence available of a contemporaneous contribution (other than the church's new statement)?

Yes, I would rather have the judge say, "I know and understand what the law says, but will allow an exception based on your circumstances, the post-dated documentation & other documentation you provided, and satisfactory evidence of the validity of the deduction."

Have a nice day.

If there was an act of God -- fire, earthquake, flood, etc -- I do not see how it would even get to the TC; I think the auditor would recognize such.

The problem is, you are injecting your own hypotheticals ["What if . . . "]. How about sticking to the case at hand.

And, remember at your next audit, when you start citing Regs/Rulings/TC decisions/Law, just think . . . "Do I want this auditor to pick and choose which legal points he will uphold, or do I want him to uphold them all?"

And, yes the dog did eat my homework

[DonPriebe]

Special circumstances?

So, what's your opinion on what an auditor/judge should do when the taxpayer's home is destroyed by an Act of God in the same situation? IYHO, Should the deduction be disallowed because there is no evidence available of a contemporaneous contribution (other than the church's new statement)?

Yes, I would rather have the judge say, "I know and understand what the law says, but will allow an exception based on your circumstances, the post-dated documentation & other documentation you provided, and satisfactory evidence of the validity of the deduction."

You can argue that point, but in the original posting there was no mention of "special circumstances". The taxpayer apparently made single contributions of over $250 each which currently require [and did require in 2005] a written acknowledgment from the organization. Such acknowledgment must be in hand before the return is filed. It wasn't. Case closed.