Refunds may be available for clients who did not literally follow the substantiation requirements for certain charitable contributions of property.

• Author: Blumenreich, Richard

A recent Tax Court opinion held that full compliance with the reporting requirements for certain charitable contributions of property was not necessary to claim a deduction under Sec. 170.

In Bond, 100 TC 4 (1993), the taxpayer claimed a deduction for a charitable contribution of two blimps valued at $60,000. Under IRS regulations, a donor may not claim a deduction for a charitable contribution of more than $5,000 for property contributed during a year unless the donor satisfies extensive and detailed substantiation requirements. To substantiate the deduction, the taxpayer had the blimps appraised by a qualified appraiser and completed and filed Form 8283, Noncash Charitable Contributions (containing a detailed appraisal summary), with its return. However, the taxpayer did not obtain a separate written appraisal as required by Reg. Sec. 1. 170A-13(c)(2).

Regs. Sec. 1. 170A-13(c) generally provides that a taxpayer must comply with two requirements to claim a charitable deduction of more than $5,000 for property contributed during the year. First, the donor must timely obtain a written "qualified appraisal" for the property contributed. Second, the donor must attach a fully completed appraisal summary (Form 8283) to the tax return on which the deduction for the contribution is first claimed by the donor.

In Bond, the IRS contended that the taxpayer's claim for a charitable deduction for the blimps should be disallowed; by not obtaining and attaching to his return a written appraisal of the blimps, the taxpayer failed to satisfy the prerequisites to a charitable contribution under the regulations.

In formulating its decision, the Tax Court applied the test set forth in Taylor, 67 TC 1071 (1977), to determine if the substantial compliance doctrine applies to the substantiation requirements of the regulations. That test considers whether the regulation requirements relate to the substance or essence of the statute, as opposed to being procedural or directory (in that they are not of the essence of the thing to be done but are given with a view to the orderly conduct of business).

Applying the test, the Tax Court determined that the essence of Sec. 170 is to allow certain taxpayers a charitable deduction for contributions made to certain organizations. While the substantiation requirements were helpful in the processing and auditing of returns, they did not relate to the...