The tax law allows generous deductions for charitable gifts of property, but the donations must be properly substantiated. As shown in a new case involving donations of cycling and paintball gear, Gibson, TC Summ. Op. 2026-1, 1/6/26, claims for high-value property could trigger alarms at the IRS.
Background: The basic rules for substantiating charitable deductions are relatively well-known to both tax professionals and donors. Generally, the exact requirements depend on the size and nature of the gift. No deduction is allowed for contributions of clothing or household items unless these items are “in good used condition or better.”
For donations valued at $250 or more, the donor must obtain a contemporaneous written acknowledgment from the charity describing the donated property, plus a statement whether any goods or services were received in exchange and a good-faith estimate of the fair market value (FMV). However, the rules are applied on a separate basis. If you make multiple contributions totaling more than $250 to the same charity during the year, you aren’t subject to the additional requirements if each separate contribution is under $250.
The rules become even more stringent for gifts with a higher FMV. For a non-cash donation exceeding $500, the written records must include the following:
- The approximate date the property was acquired and the manner of its acquisition;
- A description of the property in reasonable detail under the circumstances;’
- The cost or other basis of the property;
- The FMV of the property at the time it was contributed; and
- The method used in determining the FMV.
Finally, the donor must obtain an independent appraisal for property valued above $5,000, in addition to meeting the aforementioned requirements. This is critical for deductions of property with a high value.
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Facts of the new case: A married couple, residents of California, deducted nearly $200,000 in non-cash donations on Schedule A of their 2019 return. This equaled the amount they reported on Form 8283 for their non-cash charitable contributions.
The Form 8283 included donations for high-end cycling EQ apparel, which was acquired by gift, and paintball guns and ammo masks as well as baby furniture items. The couple listed “Appraisal” for the method used to determine the FMV of the high-end cycling equipment, but they did not file any appraisal with their tax return. They listed “Thrift Shop Value” as the method used to determine the FMV of the other items.
Not surprisingly, the IRS audited the 2019 return and issued a Notice of Deficiency Undeterred, the cycling and paintball enthusiasts took their case to the Tax Court.
The couple barely got out of the starting gate. The Tax Court immediately nixed the deduction because of the inadequate substantiation and the lack of any appraisal for high-income items. It agreed with the IRS that no deduction should be allowed.
Lesson to be learned: The importance of strict compliance with the recordkeeping rules cannot be overstated. Ensure that your clients are in full compliance.
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