Duncan Bass worked hard. He worked one full-time job for about 53 hours a week and a second job for about 15 hours a week. In addition to his W-2 jobs, Mr. Bass operated a landscaping, janitorial, and used clothing store business.
His landscaping and janitorial clients gave Mr. Bass men’s, women’s, and children’s clothing. He donated the better clothing to Goodwill and the Salvation Army, claiming clothing tax deductions of $13,852 and $11,594 for the two years before the court.
What Mr. Bass Thought
Mr. Bass testified before the court that he visited Goodwill and the Salvation Army 173 times. He did this to ensure that every donation receipt he completed showed a market value below $250 so he wouldn’t need appraisals.
That Was Wrong
IRS Form 8283 and its instructions, along with tax code Section 170(f)(11)(F) and IRS Regulation Section 1.170A-13(c), mandate grouping similar items of property (such as clothing) for purposes of the $5,000 rule that requires appraisals.
How the Court Ruled
The Court denied Mr. Bass’s request to deduct his Clothing Donations to Goodwill and the Salvation Army. The court ruled that since no appraisals were attached to his tax return, Mr. Bass could not deduct any of his donations.
Takeaways
The tax code has many rules regarding charitable giving. Make sure you know those rules before giving.
In Mr. Bass’s case, IRS Form 8283 clearly shows that gifts of similar items, such as clothing, must be grouped for purposes of the appraisal rules.
The tax code’s appraisal requirement seems to eliminate extensive property donations to charitable organizations.
If you would like to discuss your business or personal tax planning, tax preparation, and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton, PA office to discuss your situation. You can also schedule a consultation at Click Here.
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About Bryan Haarlander, EA, CTRS:
Bryan Haarlander is an IRS-licensed Enrolled Agent and a Certified Tax Resolution Specialist who owns and operates a specialized tax services firm serving clients in the western suburbs of Philadelphia, PA. This includes the cities of Chester Springs, Coatesville, Collegeville, Devon, Downingtown, Exton, King of Prussia, Paoli, Philadelphia, Phoenixville, Pottstown, Radnor, Reading, Wayne, and West Chester. We also serve clients in Delaware, New Jersey, New York, and the United States.
Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems.
