Charitable Contributions: Income Tax Aspects (Portfolio 863)

Description

Tax Management Portfolio, Charitable Contributions: Income Tax Aspects, No. 863, discusses the income tax deduction for charitable contributions by individuals. Many requirements must be complied with in order to secure a charitable contribution deduction, including an eligible donee, donative intent, and substantiation of the contribution amount. The amount of the deduction is determined by the type of property donated and its fair market value.

To claim a charitable contribution deduction, the property must be donated to an eligible donee. A change in the charitable organization’s status can have an effect on the contribution deduction. The issue of donative intent rests principally on the facts of each case. The Portfolio discusses the IRS and court guidelines for determining whether a donor has the requisite charitable intent or if he or she expects a commensurate benefit in return. The substantiation requirements must be carefully reviewed in connection with donations of property, especially if an appraisal is required.

The Portfolio also analyzes the charitable contribution deduction restrictions. This analysis centers around the provisions of §170(b), (d), and (e), and the regulations thereunder, which detail the applicable limitations on charitable contribution deductions. The factors that determine the percentage limitations include the classification of donee organizations, the type of property donated, and the available carryover provisions. The computation of the percentage limitations is one of the more complex areas of the Code. Contributions are limited to 50%, 30%, or 20% of the taxpayer’s contribution base, which is defined as adjusted gross income computed without regard to any §172 net operating loss carryback. Due to the complexity of the limitations and the interaction of the various factors, the Portfolio provides numerous examples of the application of the limitations.

Additional aspects of charitable contributions are considered in 839 T.M., Estate and Gift Tax Charitable Deductions (EGT Series); 865 T.M., Charitable Remainder Trusts and Pooled Income Funds (EGT Series); and 866 T.M., Charitable Income Trusts (EGT Series); and in 794 T.M., Charitable Contributions by Corporations (U.S. Income Series).

This Portfolio may be cited as Kirschten & Freitag, 863 T.M., Charitable Contributions: Income Tax Aspects.

Table of Contents

I. Introduction – General Principles
II. Definition of Charitable Contribution
III. Valuation of Contributions and Amount of Deduction
IV. Percentage Limitations
V. Carryover of Excess Charitable Contributions
VI. Substantiation Requirements
VII. Donee Disclosure and Reporting Requirements
VIII. Tax Returns and Compliance