As you are scrambling to get your tax information together the sad story of Jolene M. Villareale is a timely reminder about one of the most absolute substantiation requirements in the Code. That is the requirement that there be a written acknowledgment from the charity for any deductible contributions of $250 or more. A simple thank you note is not enough. There must also be a statement as to the value of anything you received in return or a statement that there was not anything given to you in return.
Also and this is the part that procrastinators need to be wary of, the acknowledgement must be contemporaneous. Contemporaneous means that you have to have received it by the earlier of the date you file your return or the due date for the return, including extensions.
It is very simple. If you do not have the acknowledgement, with the proper language, do not file your return, yet. Get the acknowledgment.
If you are having trouble getting the acknowledgment, extend your return. Now. The extent to which this rule is absolute is extreme to a ridiculous extent, but – It is what it is. Deal with it. Now onto the story of Jolene Villareale.
Ms. Villareale was a co-founder of NDM Ferret Rescue & Sanctuary, Inc. I have to say that I am not fond of those little beasts myself. I can understand why they might end up homeless and in need of sanctuary. I have to commend Ms. Villareale for her compassion. Ms. Villareale was responsible for NDM’s finances including paying bills and managing bank accounts. She was also a significant supporter of NDM. In 2006, the year under consideration, she made 44 contributions totaling $10,022. 27 contributions, totaling $2,393, were for less than $250. The other 17, totaling $7,629, were each for $250 or more.
The IRS was satisfied that Ms. Villareale made the contributions and that NDM was a valid charity. Nonetheless, they did not allow deductions for the 17 contributions that each exceeded $249.99. The reason for the disallowance was that there was no written contemporaneous acknowledgment. The taxpayer thought this was rather silly, but the Court was unmoved:
We find it immaterial that petitioner was on both sides of the transaction and reject her contention that as the president of NDM “it would have been futile to issue herself a statement that expressly provided that no goods or services were provided in exchange for her contributions.”
Probably there are a lot of people who think that it makes no sense that Ms. Villareale would have been allowed the full deduction if she had either written a larger number of checks for smaller amounts or, in her capacity as president, had sat right down and wrote herself a letter
Maybe it doesn’t make sense, but as I often tell people, that is not a requirement. It is what it is. Deal with it.
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Originally published on Forbes.com Mar 23rd, 2013