Sadly, Kenneth and Susan Kunkel were turned down by the United States Tax Course on April 8, 2015 in their case against the Commissioner of Internal Revenue. The bulk of their dispute revolved around non-cash donations. For all donations of $250 or more, taxpayers generally must obtain a contemporaneous written acknowledgment from the donee. Additional substantiation requirements are imposed for contributions of property with the claimed value exceeding $500. Still more rigorous substantiation requirements, including the need for a “qualified appraisal,” are imposed for contributions of property with a claimed value exceeding $5,000. “Similar items of property” must be aggregated in determining whether gifts exceed the $500 or $5,000 threshold. The term “similar items of property” is defined to mean “property of the same generic category or type,” such as clothing, jewelry, furniture, electronic equipment, household appliances, or kitchenware. In this case, Mr. and Mrs. Kunkel made many small donations which they said were each worth less than $250, except one notable donation that occurred in a single event at their church’s annual flea market. They testified that they intentionally did that based on the assumption that those 97 distinct contributions would not put them to the requirements described briefly above. This opinion makes clear that tactic won’t work. The alleged donations of $21,920 in clothing should have been aggregated, and each item appraised by a qualified appraiser producing a qualified appraisal, filed with the appropriate forms, including the contemporaneous written acknowledgments from the donees. Similarly, the $8,000 in books should have been appraised under the same requirements. Categories that fell under $5,000, like the household furniture that aggregated to $3,090, were supposed to have and maintain additional reliable written records with respect to each item of donated property. Those would include, among other things: (1) the approximate date the property was acquired by them and the manner of its acquisition; (2) a description of the property in detail reasonable under the circumstances; (3) the cost or other basis of the property; (4) the fair market value of the property at the time it was contributed; and (5) the method used in determining its fair market value. All lot of taxpayers do not maintain those sorts of records, but they are required to make the donations deductible.
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