Monday, June 13, 2011

Catwoman Creates New Precedent for treating Unreimbursed Expenses as Charitable Contributions

LIONDOOR  An interesting Wall Street Journal article on Saturday discussed Van Dussen v. Commissioner, a case involving a cat lover who sheltered homeless cats in her own home on behalf of Fix Our Ferals, a 501(c)(3).  The issue was whether the cat lover, a family law attorney who represented herself before the Tax Court, could deduct the costs she incurred in doing so. This is one of those cases that seem easy in the abstract, but is more difficult in the implementation -- with some observers noting that the case opens the door for the deduction of costs associated with hosting a catered fund raiser in one's home, according to the article.  Those types of admittedly logical extensions are the sort that cause working stiffs to look askance at the charitable contribution deduction.  Anyway, here are the headnotes from the opinion:

P incurred unreimbursed volunteer expenses while caring for foster cats in her private residence. P’s expenses consisted primarily of payments for veterinary services, pet supplies, cleaning supplies, and household utilities. P claimed a $12,068 charitable-contribution deduction for the expenses on her 2004 tax return. R issued a notice of deficiency denying the deduction. R claims that P did not render services to a qualifying charitable organization under sec. 170(c), I.R.C., and that P failed to substantiate her expenses under sec. 170(f)(8), I.R.C., and sec. 1.170A-13, Income Tax Regs. R also asserts that P’s expenses have an indistinguishable personal component.

Held: P’s foster-cat expenses qualify as unreimbursed expenditures incident to the rendition of services to a charitable organization. See sec. 1.170A-1(g), Income Tax Regs. P’s services were directed by a charitable organization. P thus rendered services to a sec. 170(c), I.R.C., organization when she cared for foster cats in her home. Some of P’s expenses are disallowed because they are insufficiently related to foster-cat care or cannot be determined with precision.

Held, further, the recordkeeping requirements of sec. 1.170A-13(a), Income Tax Regs. (for contributions of money), govern unreimbursed volunteer expenses of less than $250.

Held, further, P’s records meet the requirements of sec. 1.170A-13(a), Income Tax Regs., because they are acceptable substitutes for canceled checks under the substantial compliance doctrine. See Bond v. Commissioner, 100 T.C. 32 (1993). P can deduct fostercat expenses of less than $250.

Held, further, P cannot deduct foster-cat expenses of $250 or more. P did not obtain the contemporaneous written acknowledgment from the charitable organization required under sec. 1.170A-13(f)(10), Income Tax Regs.

Held, further, P can deduct a $100 check donation made to a separate charitable organization.


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