The Risks of Taking on the IRS Without Legal Help

The Risks of Taking on the IRS Without Legal Help On behalf of Brian Coggins of Coggins Law Office posted in IRS on Friday, December 4, 2015. We’ve talked about a lot of critical tax issues on this blog in the past few months, We’ve outlined some important tips to know when you deal with […]

Do You Owe the IRS? Here Are a Few Tips

Do You Owe the IRS? Here Are a Few Tips. On behalf of Brian Coggins of Coggins Law Office posted in IRS on Wednesday, December 2, 2015. If you owe the IRS money and they take action against you, there are a number of things that you can do to improve your situation. First of […]

What is an Installment Agreement and How Does it Help You?

What is an Installment Agreement and How Does it Help You? On behalf of Brian Coggins of Coggins Law Office posted in IRS on Tuesday, November 17, 2015. If you owe the Internal Revenue Service money due to back taxes, then you could qualify for an installment agreement. “What is an installment agreement?,” you may […]

How to Approach an IRS Audit

How to Approach an IRS Audit On behalf of Brian Coggins of Coggins Law Office posted in IRS on Wednesday, September 30, 2015. Getting audited by the Internal Revenue Service can be one of the worst moments in anyone’s life, and even that may not be selling that notion well enough. Tax audits can be […]

What Rights do Californians Have During a Tax Audit?

What Rights do Californians Have During a Tax Audit? On behalf of Brian Coggins of Coggins Law Office posted in IRS on Wednesday, August 19, 2015. Receiving an audit notice from the IRS can make anyone’s heart drop because it typically means that an auditor will soon go through your financial records with a fine […]

This Kind of Charitable Activity Will Probably Get You Audited

In 2006 and 2007, a California veterinarian donated a group of fossilized trilobites to the California Academy of Sciences. The donation of these fossils, which are the remains of large marine arthropods (i.e., “bugs”) that lived between 250 and 500 million years ago, was a generous contribution to science, to be sure. The vet also hoped to receive substantial tax deductions. Unfortunately, he won’t be getting them.

Large charitable donations can be extremely useful for taxpayers. Not only can they help with that year’s income tax liability, but they may also limit liability for capital gains taxes. The reason is that when you donate appreciated assets to charity, you no longer have to worry about calculations like the base value and appreciation. Instead, you can just deduct the asset’s fair market value.

In order to take a significant charitable deduction, however, you have to be able to prove its legitimacy to the IRS. For a charitable contribution exceeding $250, you’re essentially going to need:

  • A written acknowledgment from the charity, dated that tax year, that the donation was a gift; you received no goods or services in return
  • Your own, reliable written records regarding your ownership of the items and their value, and
  • For gifts valued at $5,000 or more, a qualified appraisal of the item and a summary of that appraisal on IRS Form 8283

In this case, the vet donated four fossils in 2006, claiming a charitable deduction of $136,500. In 2007, he donated another eight fossils for a deduction of $109,800. Why wasn’t he entitled to the deductions?

Primarily, it was because his appraisals were apparently fakes. He submitted appraisals purportedly prepared by a real person who is considered an expert in the field of fossil valuation, but the appraiser could not remember having performed some of the appraisals and denied performing others.

Even if the appraisals had been OK, this taxpayer would still have lost, unfortunately. He did submit written acknowledgements from the California Academy of Sciences, but they did not contain the required statement that no goods or services were given in return.

The lesson? Any substantial charitable deduction must be treated like serious business. A tax attorney could have spotted these issues up front, perhaps saving the deductions. At the very least, it would have saved him a trip to the Tax Court.

 

This Kind of Charitable Activity Will Probably Get You Audited

In 2006 and 2007, a California veterinarian donated a group of fossilized trilobites to the California Academy of Sciences. The donation of these fossils, which are the remains of large marine arthropods (i.e., “bugs”) that lived between 250 and 500 million years ago, was a generous contribution to science, to be sure. The vet also hoped to receive substantial tax deductions. Unfortunately, he won’t be getting them.

Large charitable donations can be extremely useful for taxpayers. Not only can they help with that year’s income tax liability, but they may also limit liability for capital gains taxes. The reason is that when you donate appreciated assets to charity, you no longer have to worry about calculations like the base value and appreciation. Instead, you can just deduct the asset’s fair market value.

In order to take a significant charitable deduction, however, you have to be able to prove its legitimacy to the IRS. For a charitable contribution exceeding $250, you’re essentially going to need:

  • A written acknowledgment from the charity, dated that tax year, that the donation was a gift; you received no goods or services in return
  • Your own, reliable written records regarding your ownership of the items and their value, and
  • For gifts valued at $5,000 or more, a qualified appraisal of the item and a summary of that appraisal on IRS Form 8283

In this case, the vet donated four fossils in 2006, claiming a charitable deduction of $136,500. In 2007, he donated another eight fossils for a deduction of $109,800. Why wasn’t he entitled to the deductions?

Primarily, it was because his appraisals were apparently fakes. He submitted appraisals purportedly prepared by a real person who is considered an expert in the field of fossil valuation, but the appraiser could not remember having performed some of the appraisals and denied performing others.

Even if the appraisals had been OK, this taxpayer would still have lost, unfortunately. He did submit written acknowledgements from the California Academy of Sciences, but they did not contain the required statement that no goods or services were given in return.

The lesson? Any substantial charitable deduction must be treated like serious business. A tax attorney could have spotted these issues up front, perhaps saving the deductions. At the very least, it would have saved him a trip to the Tax Court.

Content retrieved from: https://cogginsdata.wpengine.com/Blog/IRS/This-Kind-of-Charitable-Activity-Will-Probably-Get-You-Audited.shtml.

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In 2006 and 2007, a California veterinarian donated a group of fossilized trilobites to the California Academy of Sciences. The donation of these fossils, which are the remains of large marine arthropods (i.e., “bugs”) that lived between 250 and 500 million years ago, was a generous contribution to science, to be sure. The vet also hoped to receive substantial tax deductions. Unfortunately, he won’t be getting them.

Large charitable donations can be extremely useful for taxpayers. Not only can they help with that year’s income tax liability, but they may also limit liability for capital gains taxes. The reason is that when you donate appreciated assets to charity, you no longer have to worry about calculations like the base value and appreciation. Instead, you can just deduct the asset’s fair market value.

In order to take a significant charitable deduction, however, you have to be able to prove its legitimacy to the IRS. For a charitable contribution exceeding $250, you’re essentially going to need:

  • A written acknowledgment from the charity, dated that tax year, that the donation was a gift; you received no goods or services in return
  • Your own, reliable written records regarding your ownership of the items and their value, and
  • For gifts valued at $5,000 or more, a qualified appraisal of the item and a summary of that appraisal on IRS Form 8283

In this case, the vet donated four fossils in 2006, claiming a charitable deduction of $136,500. In 2007, he donated another eight fossils for a deduction of $109,800. Why wasn’t he entitled to the deductions?

Primarily, it was because his appraisals were apparently fakes. He submitted appraisals purportedly prepared by a real person who is considered an expert in the field of fossil valuation, but the appraiser could not remember having performed some of the appraisals and denied performing others.

Even if the appraisals had been OK, this taxpayer would still have lost, unfortunately. He did submit written acknowledgements from the California Academy of Sciences, but they did not contain the required statement that no goods or services were given in return.

The lesson? Any substantial charitable deduction must be treated like serious business. A tax attorney could have spotted these issues up front, perhaps saving the deductions. At the very least, it would have saved him a trip to the Tax Court.

 

How Do I Start an Appeal of an IRS Audit?

How Do I Start an Appeal of an IRS Audit? On behalf of Brian Coggins of Coggins Law Office posted in IRS on Friday, June 5, 2015. While taxpayers can fight to protect themselves during an IRS audit, often the auditor hands down a decision that is unfair or not based on the facts. This […]

Facing an IRS Audit: What Do I Do Now?

Facing an IRS Audit: What Do I Do Now? On behalf of Brian Coggins of Coggins Law Office posted in IRS on Friday, April 3, 2015. With the filing deadline for federal tax returns coming up in just a couple weeks, taxes are on the mind of most working Americans. If you are reluctant to […]