Tax Case Shows It’s Better To Give Than To Receive Notification of an IRS Audit

By | January 9, 2013

The Bible says God loves a cheerful giver, and the U.S. Tax Code says a cheerful giver loves the charitable contribution deduction. But according to the outcome of the recent case Durden v. Commissioner, the Tax Court hates both God and cheerful givers.

According to an article in The Tax Adviser, here's what happened.
In 2007, the Durdens claimed a charitable contribution deduction of $22,517 for cash contributions to their church. Most individual contributions exceeded $2501.
First off, the Durdens are sinners because the Bible says, "When you give […] do not let your left hand know what your right hand is doing, so that your giving may be in secret." It's hard to maintain that your left hand doesn't know what your right hand is doing when the Department of the Treasury knows what your right hand is doing2.
 
Regardless, $22,517 is a lot of shekels, so the IRS called BS under the assumption that no one believes in God to that extent during a recession.
Upon questioning by the IRS, the Durdens produced a letter from their church acknowledging the contributions, as well as canceled checks supporting the amounts of the claimed deduction.
Suck it, IRS, and pony up some of that filthy lucre! Wait. What?
The IRS declined to accept the [church's] acknowledgment [of the contributions] on the grounds that it did not contain the required statement under Sec. 170.
What required statement under Sec. 170?
For donations of $250 or more […] the donor must obtain a contemporaneous written acknowledgment […], stating the amount of the contribution [and] whether the donee provided goods or services in consideration for the donation […]. If goods or services received consist solely of intangible religious benefits, the contemporaneous documentation must contain a statement to that effect.
So the church secretary didn't write "goods and services provided in consideration for these donations consisted solely of intangible religious benefits" on the Durdens' annual giving statement. Fortunately, the Durdens didn't have oil miraculously appear in empty jars that they borrowed from their neighbors because that would probably be considered a tangible religious benefit.
 
So what did the Durdens do?
The Durdens subsequently obtained a second written acknowledgment from their church with the required language.
Problem solved. Right? Nope.
The IRS [and the Tax Court] disregarded it because it did not meet the contemporaneous written acknowledgment requirement of Sec. 170(f)(8)(C), which defines contemporaneous as [something different than what they got]3.
So the Durdens had to pay about $7,500 in additional taxes because they were unlucky enough to get singled out for an audit, and their church treasurer failed to conform with the minutiae of the tax code. Either that or God hates them.
 
And always remember, when giving a large cash donation to your church, write a series of checks with different dates and with the amount of each check not exceeding $249. That's a better loophole than buying indulgences or premarital butt sex.
 
1This is important later on.
2They're also sinners because Mr. Durden covets his neighbor's ox.
3In this case "contemporaneous" means the earlier of the date of filing or the extended due date, including extensions, of the return4.
4You're welcome, nerds.