Magic words for charitable deduction…

**The Fine Print Cost a Widow a $464,000 Tax Deduction**
**A large gift of American Indian artifacts went awry when the donor didn’t have ‘magic language’ from the museum she gave it to**
**By Laura Saunders, The Wall Street Journal, July 22, 2022**


**On her 2014 tax return, Ms. Albrecht claimed a charitable-donation deduction of $463,676 for her gift. Although her income wasn’t large enough to take the entire deduction for 2014, the law allowed her to carry over and use the remainder for five more years. Attached to her return was a five-page Deed of Gift detailing the donation.**

**Among other things, the deed said the gift was irrevocable and unconditional. However, Ms. Albrecht didn’t have what the law calls a “contemporaneous written acknowledgment” from the museum explicitly saying whether or not she received goods or services in return for her donation.**

__This is “the magic language requirement,” although the wording can vary. Even if no goods or services were provided to Ms. Albrecht by the Wheelwright, *she needed this statement in hand before filing her tax return* to be eligible for a deduction. ...__ [end quote]



No “magic words” here. What she needed was a receipt from the charity for the donation.

The article is behind a paywall for me, so I was not able to read it. But from the bits you posted, it sure sounds like she failed to get a receipt from the charity for the donation.

This has been a well-known requirement for years. Charities know of the requirement. Tax preparers know of the requirement. Many taxpayers (but certainly not all) know of the requirement. And while it’s commonly something that is not perfectly followed, when you’re dealing with a contribution of this magnitude, as a preparer you make sure the requirement is followed. In my practice, I generally ask clients for the receipt when any single donation gets into the low to mid 4 figures area. And then I put a copy into my files, because you never know when it’s going to be needed. And having it in my files provides evidence that it was on hand before the return was filed.

Yes, the receipt needs to say something about any goods or services received in exchange for the donation. And even if goods or services were received, they just adjust the deductible amount of the donation, they don’t disallow it completely. (Unless the value of the goods/services received exceed the amount given to the charity.)

I have some sympathy for the taxpayer here. Clearly, there was room for some negotiation over this issue long before the issue got to court. I suspect there was some stubbornness on both sides in this case. But I also know the law - as should any tax professional. And the law requires a receipt that specifically talks about anything received in exchange for the donation or specifically says that nothing was received.



While this might be news to the Wall Street Journal, the actual decision is two months old. It was reported here:…