Documenting charitable deductions.

Facts: It is tax season once again for Nick Jones, a CPA tax preparer. Lately, clients have been calling to ask the kind of documentation they will need to verify deductions claimed for donations of stock, art and real estate. Issues: Nick thinks that it would be valuable to send a chart to clients, so that, in the future, they will know in advance of a donation the kind of documentation required.

Analysis: Exhibit 1 below contains a chart describing the types of documentation required to substantiate various types of charitable contributions from individual taxpayers. Failing to maintain the proper documentation generally results in the donation being nondeductible.

Exhibit 1: Documentation guide for charitable contributions

Type of donation                     Less than $250

Cash                                 Cancelled check, receipt or
                                     other reliable written records

Noncash:                             Receipt or reliable written
1. Publicly traded stock             records (2)

2. Nonpublicly traded stock          Receipt or reliable written
                                     records (2)

3. Artwork                           Receipt or reliable written
                                     records (2)

4. All other noncosh dona-           Receipt or reliable written
tions                                records (2)

Payroll deduction                    Paystub or other reliable writ-
                                     ten record

Out-of-pocket expenses               Receipt, cancelled check or
while serving as a                   other reliable written records
volunteer

Type of donation                     $250 to $500

Cash                                 Acknowledgment (1)

Noncash:                             Acknowledgment (1)
1. Publicly traded stock
                                     Reliable written records (2)

2. Nonpublicly traded stock          Acknowledgment

                                     Reliable written records (2)

3. Artwork                           Acknowledgment (1)

                                     Reliable written records (2)

4. All other noncosh dona-           Acknowledgment (1)
tions
                                     Reliable written records (2)

Payroll deduction                    Paystub, Form W-2 or other
                                     reliable written record

                                     Documentation from charity (6)

Out-of-pocket expenses               Receipt, cancelled check or
while serving as a                   other reliable written records
volunteer
                                     Acknowledgment (7)

Type of donation                     Over $500, up to $5,000

Cash                                 Acknowledgment (1)

Noncash:                             Acknowledgment (1)
1. Publicly traded stock
                                     Reliable written records (2,3)

2. Nonpublicly traded stock          Acknowledgment (1)

                                     Reliable written records (2,3)

3. Artwork                           Acknowledgment (1)

                                     Reliable written records (2,3)

4. All other noncosh dona-           Acknowledgment (1)
tions
                                     Reliable written records (2,3)

Payroll deduction                    Paystub, Form W-2 or other
                                     reliable written record

                                     Documentation from charity (6)

Out-of-pocket expenses               Receipt, cancelled check or
while serving as a                   other reliable written records
volunteer
                                     Acknowledgment (7)

Type of donation                     Over $5,000

Cash                                 Acknowledgment (1)

Noncash:                             Acknowledgment (1)
1. Publicly traded stock
                                     Reliable written records (2,3)

2. Nonpublicly traded stock          Acknowledgment (1)

                                     Reliable written records (2,3)

                                     Qualified appraisal (4)

                                     Declaration of appraiser and
                                     donee acknowledgment
                                     (Form 8283, Noncash
                                     Charitable Contributions)

3. Artwork                           Acknowledgment (1)

                                     Reliable written records (2,3)

                                     Qualified appraisal (5)

                                     Declaration of appraiser and
                                     donee acknowledgment
                                     (Form 8283)

4. All other noncosh dona-           Acknowledgment (1)
tions
                                     Reliable written records (2,3)

                                     Qualified appraisal

                                     Declaration of appraiser and
                                     donee acknowledgment
                                     (form 8283)

Payroll deduction                    Paystub, Form W-2 or other
                                     reliable written record

                                     Documentation from
                                     charity (6)

Out-of-pocket expenses               Receipt, cancelled check or
while serving as a                   other reliable written
volunteer                            records

                                     Acknowledgment (7)

(1) The charity's written acknowledgment must include a description of
the property or the amount of cash donated, plus a statement as to
whether the donor received any goods or services (with a good-faith
estimate of value) for the donation; see Regs. Sec. 1.170A-13(f). If
the donor received intangible religious benefits, the acknowledgment
must so state, although no valuation of such benefits is required.
Taxpayers must receive the acknowledgment before the earlier of (1) the
date the return for the donation year is filed or (2) the due date
(including extensions) for filing the return. The acknowledgment can be
either a paper copy or in electronic format, such as an email addressed
to the donor; see IRS Pub. 1771, Charitable Contributions-
Substantiation and Disclosure Requirements.

(2) Reliable written records must include the following information (1)
the name and address of the donee organization; (2) the date and
location of the contribution; (3) a description of the property; (4)
the property's fair market value (FMV) car cost, if taxpayer elects to
reduce FMV for appreciated property); (5) information on contributions
of partial interests in property (if applicable); and (6) the terms of
any conditions attached to the donation (if applicable); see Regs. Sec.
1.170A-13(b)(2)(ii). For donations of less than $250, reliable written
records are required when it is impractical to obtain a receipt from
the donee organization; see Regs. Sec. 1.170A-13(b)(1).

(3) In addition to items described in note 2, supra, records must also
include information on how and when the property was acquired. A
taxpayer must also maintain records of cost or adjusted basis if
the property was held for less than 12 months and, if available, the
cost or adjusted basis of property held for 12 months or more (this
does not apply to publicly traded securities); see Regs. Sec.
1.170A-13(b)(3).

(4) An appraisal is required for nonpublicly traded stock valued at
more than $10,000; see Regs. Sec. 1.170A-13(c)(2)(ii).

(5) According to Ann. 90-25 and IRS Pub. 561, Determining the Value of
Donated Property, for individual art objects or a group of similar art
objects valued at $20,000 or more, the donor must attach a complete
copy of the signed appraisal to the return and maintain in his or her
files a photograph of sufficient size and quality to fully show the
object.

(6) The donor must obtain a pledge card or other documentation from the
charity that also states that the charity does not provide goods at
services in return for any contribution made to it by payroll
deduction.

(7) The charity's acknowledgment must contain (1) a description of the
services provided and (2) a statement as to whether it provided any
goods or services in return for the services and, if so, a description
and good-faith estimate of their value (or a statement that it only
provided intangible religious benefits). The volunteer must receive
the acknowledgment by the earlier of the date his or her return for the
year of the volunteer efforts is filed or the return due date
(including extensions).