Charitable Contributions

[BUSYBEE]

here is a new one
my client donated 200000.00 to a Charity in 2013 for research.
H did not take the deduction for it because his AGI was only 5000.00
the research was not done.
So the charity return the 200000.00
In 2014 on a 1099misc line 7
So now he has to claim the money as income
what to do?

[Super Mom]

Wow! The things we have to deal with! What box did they put the money in on the 1099?

[Bob McCoy]

Wow! The things we have to deal with! What box did they put the money in on the 1099?

Ya, how many times do you find somebody looking to give a six figure some away, and then the person not take it.

[BOB W]

AMEND the 2013 return and claim the contribution. The return will create a charitable contribution carryover to 2014. All will not be equal but it is better than nothing.

Box 7 means Non employee compensation. Have issuer change to box 3, Other income.

[JohnH]

This is interesting. The fact that the charity returned the contribution means they considered that the giver never relinquished control of the funds. Therefore, a contribution never took place and there was no deduction allowable in the first place. (In this case, maybe that's a good thing for the taxpayer - not so good for the charity.) This could be trouble for the charity if IRS chose to take a look at their practices, because they are not supposed to handle contributions in this manner.

I'd be inclined to wash this through a schedule C with an offsetting entry which says "Form 1099Misc issued in error", then attach an explanatory note detailing the sequence of events and copies of any correspondence back & forth with the organization. I'd also keep everything handy to send in again when IRS throws away all the documentation and we wind up having to respond to a CP2000 about 18 months from now.

[kathyc2]

I would take the position that this is a refund and not taxable. Same general concept as state tax refund is taxable only to the extent of PY tax benefit received.

Agree that it should have been in Box 3 rather than 7.

I'm assuming the charity included a letter w/ refund explaining that they are not going to do research project and are therefore returning donation? If so, I'd recognize the 200K on line 21 and then back it out so the net is zero, and send a copy of the letter along with the return.

[taxea]

I would put it on and adjust it out on ln 21. Was the return of funds accompanied by a letter thanking him for the "loan". You can use that to show it was return of "investment" with no interest earned.

[BUSYBEE]

back again
try this one
tax benefit rule. You must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year.
to me this state that he did not claim a deduction he does not need to claim the money as income