Documenting charitable deductions.

• Author: Ellentuck, Albert B.

Facts: It is tax season once again for Nick Jones, a CPA tax preparer. Lately, clients have been calling to ask the kind of documentation they will need to verify deductions claimed for donations of stock, art and real estate. Issues: Nick thinks that it would be valuable to send a chart to clients, so that, in the future, they will know in advance of a donation the kind of documentation required.

Analysis: Exhibit 1 below contains a chart describing the types of documentation required to substantiate various types of charitable contributions from individual taxpayers. Failing to maintain the proper documentation generally results in the donation being nondeductible.

Exhibit 1: Documentation guide for charitable contributions Type of donation Less than $250 Cash Cancelled check, receipt or other reliable written records Noncash: Receipt or reliable written 1. Publicly traded stock records (2) 2. Nonpublicly traded stock Receipt or reliable written records (2) 3. Artwork Receipt or reliable written records (2) 4. All other noncosh dona- Receipt or reliable written tions records (2) Payroll deduction Paystub or other reliable writ- ten record Out-of-pocket expenses Receipt, cancelled check or while serving as a other reliable written records volunteer Type of donation $250 to $500 Cash Acknowledgment (1) Noncash: Acknowledgment (1) 1. Publicly traded stock Reliable written records (2) 2. Nonpublicly traded stock Acknowledgment Reliable written records (2) 3. Artwork Acknowledgment (1) Reliable written records (2) 4. All other noncosh dona- Acknowledgment (1) tions Reliable written records (2) Payroll deduction Paystub, Form W-2 or other reliable written record Documentation from charity (6) Out-of-pocket expenses Receipt, cancelled check or while serving as a other reliable written records volunteer Acknowledgment (7) Type of donation Over $500, up to $5,000 Cash Acknowledgment (1) Noncash: Acknowledgment (1) 1. Publicly traded stock Reliable written records (2,3) 2. Nonpublicly traded stock Acknowledgment (1) Reliable written records (2,3) 3. Artwork Acknowledgment (1) Reliable written records (2,3) 4. All other noncosh dona- Acknowledgment (1) tions Reliable written records (2,3) Payroll deduction Paystub, Form W-2 or other reliable written record Documentation from charity (6) Out-of-pocket expenses Receipt, cancelled check or while serving as a other reliable written records volunteer Acknowledgment (7) Type of donation Over $5,000 Cash...