#6 Contributions - Substantiation Requirements

Over the past several months we have discussed the requirements for reporting/deducting charitable contributions. In our final post, we will discuss the substantiation rules...

The Pension Protection Act of 2006 (PPA of 2006) changed the substantiation requirements for deducting charitable contributions. Prior to 2007, donors could deduct charitable contributions using a cancelled check, a receipt from the charity or another reliable written document.

For 2007 and following, the PPA of 2006 requires that cash contributions be substantiated by either a bank record (cancelled check) or a written communication from the receipt.

If the individual contribution (cash or property) exceeds $250 the donor is required to substantiate the donation by a contemporaneous written acknowledgement from the charity. Cancelled checks are no longer allowed for cash contributions individually exceeding $250.

Certain documentation is required for quid pro quo cash contributions, depending on the amount. Quid pro quo contributions are payments made partly as a contribution and partly in consideration for goods and services.

For non-cash property contributions less the $500, the donor should maintain the following information:
1. Donee's name and address
2. Date of contribution and location of the property
3. Property description
4. Fair market value of property including appraisal if obtained.
5. Cost or other basis of the property.
6. Amount of deduction claimed
7. Documentation of any terms/restrictions placed on use of the property

For non-cash property contributions ranging from $500 to $5,000, the donor should maintain documentation satisfying the above 7 requirements plus:
1. Description of how the donor acquired the property
2. Date of property acquisition
3. Cost or other basis, including any adjustments, of the donated property

For non-cash property contributions exceeding $5,000, the donor must satisify the following three requirements:
1. Qualified appraisal dated at least 60 days prior to the contribution
2. Complete a qualified appraisal summary enclosed in the donor's tax return
3. Maintain records that document the requirements of non-cash contributions less than $500 above.

For additional information relating to contributions of cars, boats and planes, see Laurie Gnad's posts beginning November 7, 2007. .

For additional help in determining what documentaiton is required for charitable contributions, contact us.