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Charitable Contribution Acks Must Have Magic Words

If you donate $25K by checks during a year to your church, and have a written acknowledgement from the church and cancelled checks you can deduct the $25K on Schedule A of your tax return - right? Not so fast. The "written acknowledgement" from the church must not only acknowledge the amount of your donations, but contain a statement indicating that "no goods or services were provided to you in return for your donations" (other than intangible religious benefits if a church) per IRC 170(f)(8). We have told our clients of this for years in our engagement letters, but now a Tax Court case actually disallowed a deduction simply because the church acknowledgement lacked the magic words. In Durden TC Memo 2012-140, the IRS succesfully disallowed a $25K charitable deduction, because the taxpayers original written acknowlegement from the church lacked the magic words. During the audit the taxpayers obtained an enhanced written acknowledgement from their church with the magic words, but the IRS successfuly disallowed the deduction because the statute requires the acknowledgement to be "contemporaneous" (before the extended date the return is filed).  Read the decision for yourself here:

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Greenlee, Kurras, Rice, Brown
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