Joe Alfred Izen v. Comm., 38 F.4th 459
This post is part of our series on recent important tax cases that may be of interest to accounting, tax, and finance professionals. For more like this, see our Federal Tax Update and California Federal Tax Update, which offer a comprehensive analysis of the year’s most pivotal tax developments.
Charitable Contribution Denied; Substantiation Rules Not Strictly Complied With (Joe Alfred Izen v. Comm., 38 F.4th 459 (5th Cir. 2022))
During an IRS audit of Joe Alfred Izen’s 2012 tax return, Mr. Izen remembered he donated his 50% partnership interest in a vintage airplane to the Houston Aeronautical Heritage Society. He filed a Form 1040X claiming a $338,080 deduction for the donation. To the Form 1040X he attached Form 8283, Noncash Charitable Contribution, and a written letter from the Houston Aeronautical Heritage Society that described the donation. The letter did not mention Mr. Izen and did not provide his taxpayer identification number.
Contemporaneous written acknowledgment. Section 170(f)(12)(A)(i) disallows the deduction unless the requisite contemporaneous written acknowledgment is included in the tax return claiming the deduction. The Appellate Court agreed that Mr. Izen did not provide a satisfactory contemporaneous written acknowledgement with his Form 1040X. The letter from the Society discussing the donation of the airplane that Mr. Izen included was addressed to Philippe Tanguy, not Mr. Izen. The letter did not substantiate the contribution of the airplane under §170(f)(12)(B)(i). Mr. Izen also included a copy of the donation agreement between him, Tanguy, and the Society, but the agreement failed to satisfy §170(f)(12)(B)(i) as it lacked Mr. Izen’s taxpayer identification number. Finally, Mr. Izen attached Form 8283 to his Form 1040X, but the Form 8283 did not include his social security number.
Tax practitioner planning. This taxpayer prepared his own tax return, but there is still a lesson for us. If you’re preparing this return, be sure to ask for the charity receipt and check that the name of the donor matches your client’s name. That is an easy mistake to watch for, but this taxpayer also needs a receipt with the “no goods and services” verbiage. In addition, he needs an appraisal and Form 8283 signed by the appraiser and the charity. The devil is in the details, or the deduction is lost.