Following the Rules for Donating Goods to Charity Or Lose the Deduction

For many charitable taxpayers, donating household items like clothing, furniture or electronic items is a way to lighten the burden of both home clutter and tax strain. Items such as these are tax deductible, provided you attain a receipt.  But not just any receipt.  The receipt should  contain a dated and signed description and condition of the goods donated . 

In a recent case,  a person donated $28,000 worth of goods from his parents’ home to a qualified charity, the Salvation Army. He obtained two blank tax receipts from them and claimed the appropriate deductions on his tax return that calendar year. He listed each item on the proper schedule and valued them according to the organization’s list on their website. However, the taxpayer failed to substantiate the items according to IRC Sec. 170(f)(8) and (11). Charitable taxpayers are required to prove the condition of donated goods or obtain an appraisal to support their value if they are greater than $500 in value. The Tax Court ruled in the case none of the deductions were allowable.

The lesson learned is to follow  the rules on charitable giving to the fullest extent of the  law.   One way this taxpayer could have proved condition is to document each item in a clear photograph, along with the appropriate description, value and supporting valuation. 

Our office is here to ensure your tax return is professionally prepared under the tax laws.

Without Proper Substantiation, No Charitable Deduction of Household Goods; No. 2014-20; Tax Action Bulletins; pg. 20; (2014).

There are no secrets in bankruptcy

There are several important points I make to all my clients. The first is a request to be open with me and the court regarding your financial information. Most importantly to do so through our entire relationship without deviation. In law, we call this full disclosure and transparency. A recent case shows what you should NOT do when filing bankruptcy:

Timothy P. of La Mesa, California filed for bankruptcy in 2010. At that time, Timothy planned to sell his collectable1957 Thunderbird automobile in order to fund the Chapter 11. His schedules stated that the car was worth $80,000. A Chapter 7 trustee traveled to his home and witnessed the car in his garage. Shortly after, the car
disappeared. In the ensuing trial Mr. P. testified that he had no idea what happened to the car. Subsequently, he testified under oath that he thought his son came for the car but was not sure. He later admitted he had lied, and in fact he had requested his son to take the car. Evidence showed that Mr. P. had hid the car after the Chapter 7 trustee saw it on his premises. Mr. P. was convicted of perjury, among other damaging offences.

Bankruptcy is a viable option for many and can lead to a new beginning. It starts with showing hat you have nothing to hide.

California Man Concealed Thunderbird in Montana Bankruptcy; No. 2014-20; Tax Action Bulletins; pg. 10; (2014).