Monday, February 8, 2016

IRS Rules for Non-Cash Charitable Contributions

By Henry M. Grix

A recent Tax Court decision is a cautionary tale about the importance of following IRS rules to substantiate a deduction for non-cash charitable contributions. Taxpayers must attach a qualified appraisal in support of non-cash charitable contributions in excess of $5,000. In the Tax Court case, Mr. and Mrs. Gemperle (and their CPA) claimed a charitable deduction of $108,000, but they failed to attach the appraisal that they had, in fact, secured. At trial, taxpayers represented themselves and failed to produce their appraiser as a witness. The result was no deduction and a 40% penalty for overstating their deduction. As you compile information for your annual income tax return, be sure to follow IRS rules if you want to preserve a meaningful charitable deduction and avoid penalties. See Gemperle v. Commissioner, TC Memo 2016-1.

Please contact Henry M. Grix in our Troy, Mich. office at 248-433-7548 if you have any questions or would like further information.