Two recent court decisions highlight the need for taxpayers to be aware of the documents that are required to substantiate their charitable deductions or standard mileage rate deductions and to keep those records.
In Gomes v. Comm’r, a married couple claimed a $6,885 charitable contribution deduction on their 2005 joint tax return. Although the couple produced 20 checks and a letter from the church (dated in 2008) in support of the contributions, the U.S. Tax Court still denied the deduction.
Under federal law, a charitable deduction of $250 or more is denied unless the taxpayer has a contemporaneous written acknowledgment of the donation. This means the acknowledgment must be obtained by the earlier of (1) the date the return is filed or (2) the return’s due date. Here the church’s acknowledgment was not contemporaneous because it was dated in 2008. Thus, despite having cancelled checks and the church’s letter, the taxpayers still could not claim a charitable deduction for their donations.
In a similar case, Larsen v. Comm’r, the taxpayer deducted the cost of the business use of his car using the standard mileage rate. The taxpayer kept a hand-held daily mileage log to record his business trips and mileage. The daily logs were ultimately transferred to monthly logs. At trial, the taxpayer produced only the monthly logs.
Under Section 274(d), no deduction is allowed for mileage expenses unless the taxpayer has adequate records or corroborating evidence which notes the amount, time and place, and business purpose for the expense. Although the taxpayer’s records were not contemporaneous, the Tax Court determined that there was credible corroboration that the monthly logs were prepared from the contemporaneous hand-held daily logs. Therefore, the taxpayer was allowed to claim a deduction.