Broker Check

October 2, 1995

You will recall that I wrote you last year to tell you about the tough new rules for deducting charitable contributions of $250 or more. Under the rules which went into effect in 1994, a cancelled check isn`t sufficient proof of a charitable donation of $250 or more. Instead, those rules required you to get a written acknowledgment from the charity before you filed your return in order to claim the deduction.

I`m writing now to give you some good news. The IRS has said it will be lenient with taxpayers who haven`t been able to comply with these new rules for charitable contributions made in 1994. Therefore, if you haven`t been able to get the necessary written acknowledgment from an organization to which you donated $250 or more in 1994, you may still be able to claim a charitable deduction. Here`s what must be done.

You must be able to show that you`ve made a good faith effort to get the acknowledgment by October 16, 1995. If you succeed in getting it, that`s good. But, all that`s essential is that you try in good faith to do so. What I recommend is that you send a certified letter to the organization, requesting that it provide you with a written acknowledgment in the proper form. I have enclosed, with this letter, a sample draft letter for your use. Copy the draft, filling in the blanks, and send it immediately, return receipt requested, to any charitable organization to which you made one or more gifts of $250 and from which you haven`t yet received the required acknowledgment.

If you already filed your tax return, and didn`t claim a deduction because you didn`t have the required acknowledgment, don`t worry. We can prepare an amended return to claim the deduction.

Because there is no indication that IRS will be as forgiving when it comes to 1995 tax returns, I`d like to again go over the substantiation rules that went into effect in 1994. These rules currently apply to contributions made after 1994.

The rules apply to any gift of property or cash. If your give property for which you claim a deduction of $250 or more, you`ll need a written receipt from the charity. The receipt must describe the property, but needn`t place a value on it.


Dear Sir/Madam:

          I am writing to request that (Name of Organization) provide me with written acknowledgment, that meets the requirements of Internal Revenue Code Sec. 170(f)(8), of each of the following contributions of $250 or more made by me to the organization: (List each contribution and the date on which it was made. If the contribution was of property, rather than cash, describe the property.)

          As I am sure you are aware, since new tax rules came into effect in 1994, no deduction can be claimed for a charitable contribution of $250 or more unless written acknowledgment of the gift is received from the donee organization. It is therefore very important to me that you send the required acknowledgment as soon as possible. I understand that this may be somewhat burdensome, and appreciate your cooperation.

          Code Sec. 170(f)(8) requires the acknowledgment to contain the following specific information. Therefore, please make sure to include the following:

  1. The amount of each cash contribution of $250 or more made by me to your organization during 1994.
  2. A description (but not value) of contributions of property other than cash. I have identified above the property I gave to organization in 1994 and which I value at $250 or more.
  3. Whether the organization provided any goods or services in consideration, in whole or in part, for any gifts identified in (1) or (2) above.
  4. A description and good faith estimate of the value of any goods or services identified in (3) above provided by the organization. If any of those goods or services consist solely of intangible religious benefits, that is a sufficient description, and it isnÕt necessary to value them. An "intangible religious benefit" is an intangible religious benefit provided by an organization organized exclusively for religious purposes and which generally is not sold in a commercial transaction outside the context of a donation.

          As you may be aware, IRS has extended the time for getting written acknowledgments for gifts made in 1994 until October 16, 1995. I would greatly appreciate your immediate attention to this request. In any case, please provide me with a written acknowledgment that includes the information described above, no later than October 16, 1995. Thank you for your assistance.

                                                                                  Very truly yours,

As always, if you have questions about these or any other tax matters, please call me.