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Donating property? Keep good records

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in Small Business Tax,Small Business Tax Deduction Strategies

This point can’t be emphasized enough: You must keep the detailed records required by the tax law to back up claims for charitable donations of property.

Alert: A taxpayer in a new Tax Court case failed to properly substantiate charitable gifts. (Kunkel, TC Memo 2015-71, 4/8/15) As a result, a claimed deduction of more than $37,000 was reduced to an allowable deduction of zero!

To make matters worse, the Tax Court imposed a 20% penalty on the taxpayer for intentionally disregarding the rules.

Here’s the whole story: The tax law imposes strict substantiation requirements on charitable gifts of property, even relatively modest ones. Generally, the exact record-keeping required depends on the claimed value. In any event, no deduction is allowed if the property isn’t in good condition.

For donations of gifts valued at less than $250, you must obtain a receipt from the organization, unless it’s impractical to do so, like when you...(register to read more)

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