Reforming the Charitable Contribution Substantiation Rules

Abstract

In May 2012, the Tax Court issued two decisions denying income tax deductions for gifts to charitable organizations because the taxpayers had failed to comply with applicable substantiation rules. In Mohamed v. Commissioner, the taxpayer in 2003 and 2004 donated real property unquestionably worth more than $15 million to his charitable remainder unitrust. The taxpayer himself filled out the Form 8283 required for certain noncash contributions without reading the instructions. He did not fill out the form completely and did not attach the required appraisal, although, as the Tax Court acknowledged, the Form 8283 at the time directed that an appraisal be attached only for artwork worth at least $20,000. Moreover, the taxpayer, an experienced real property appraiser, prepared the appraisal himself. Because of the taxpayer’s position as donor — and also as trustee of the charitable remainder trust and as donee — his appraisal was not an independent appraisal. It did not and could not meet the requirement of a qualified appraisal under Regulations section 1.170A-13(c)(5)(iv)(A) and (C).