The opinion
United States Tax Court
T.C. Summary Opinion 2026-1
LUKE GIBSON AND BREEANA GIBSON,
Petitioners
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent
—————
Docket No. 17305-23S. Filed January 6, 2026.
—————
Luke Gibson and Breeana Gibson, pro sese.
Monica D. Polo, John F. Patton, and Michael W. Brown, for respondent.
SUMMARY OPINION
LEYDEN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 1 of the Internal Revenue Code in effect
when the Petition was filed. Pursuant to section 7463(b), the decision
to be entered is not reviewable by any other court, and this Opinion shall
not be treated as precedent for any other case.
After concessions, 2 the sole remaining issue for decision is
whether petitioners are entitled to deduct $188,563 for noncash
1 Unless otherwise indicated, statutory references are to the Internal Revenue
Code, Title 26 U.S.C. (I.R.C.), in effect at all relevant times, regulation references are
to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times,
and Rule references are to the Tax Court Rules of Practice and Procedure.
2 The parties signed and filed a Stipulation of Settled Issues agreeing to the
following items: (1) an adjustment to cash contributions of $2,019 rather than the
$7,194 in the Notice of Deficiency, (2) a general business credit of $74,280, and
(3) additional unreported income of $86,626 that should have been reported on
Served 01/06/26
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charitable contributions for 2019. The Court concludes petitioners are
not entitled to that deduction.
Background
Some of the facts have been stipulated and are so found. The
parties filed a Stipulation of Facts consisting of paragraphs 1 through 9
and Exhibit1-J, Exhibit 2-J, and Exhibits 3-P through 6-P. Respondent
objected to entering stipulated paragraphs 5, 7, and 9 and Exhibits 3-P,
4-P, and 6-P into the record on the grounds of hearsay and failure to
comply with Rule 143(g). Respondent objected to entering stipulated
paragraph 8 and Exhibit 5-P into the record on the grounds of hearsay
and failure to comply with Federal Rule of Evidence 901. The Court
sustained respondent’s objections to paragraphs 5, 7, and 8 and Exhibits
3-P, 4-P, and 5-P but overruled respondent’s objection as to paragraph 9
and Exhibit 6-P. Stipulated paragraphs 1, 2, 3, 4, 6, and 9 and Exhibits
1-J, 2-J, and 6-P are incorporated herein by this reference.
Petitioners resided in California when the Petition was filed.
I. 2019 Tax Return
Petitioners timely filed their joint Form 1040, U.S. Individual
Income Tax Return, for the tax year 2019. Petitioners deducted
$194,273 in gifts to charity other than by cash or check on line 12 of
Schedule A, Itemized Deductions, attached to their tax return, which
equaled the amount they reported on Form 8283 for their noncash
charitable contributions.
On Form 8283, Noncash Charitable Contributions, attached to
their tax return, petitioners listed “high end cycling EQ apparel” that
was acquired by gift, that the “Donor’s cost or adjusted basis” was
$251,417, and that the fair market value of the items was $188,563.
Petitioners also listed “paintball guns ammo masks” and “appliances
baby furn equi 3 yds decompressed granite misc,” with donor’s cost or
adjusted basis of $10,220 and $3,500 respectively, and fair market value
of $4,810 and $900, respectively. On Part I of the Form 8283 with
respect to the “high end cycling EQ apparel” petitioners listed
“Appraisal” under the method used to determine its fair market value,
but they did not file any appraisal with their tax return. Petitioners
Schedule E, Supplemental Income and Loss. All other adjustments besides the one
that remains at issue are computational.
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listed “Thrift Shop Value” as the method used to determine the fair
market value of the other items.
II. Examination
The Internal Revenue Service (IRS) 3 examined petitioners’ 2019
tax return. During the examination, in May 2022 petitioners 4 submitted
Form 1040X, Amended U.S. Individual Income Tax Return, to the IRS
that included an amended Form 8283. Attached to the amended return
was a receipt from Hiway 80 Rescue Mission Ministry, the charitable
organization to which petitioners donated the noncash property, dated
March 26, 2019, and the receipt included an itemized list of the donated
items. The IRS did not accept the amended tax return.
Part III of the amended Form 8283, entitled Declaration of
Appraiser, was signed by Eugene H. Ruelle and dated July 1, 2019.
Attached to the Form 8283 was a report by Mr. Ruelle dated March 26,
2019, that indicated it was prepared for Luke Gibson. The report
indicates that Mr. Ruelle determined the fair market value of the items
as of March 26, 2019, the date that the items were donated to Hiway 80
Rescue Mission Ministry, and that the fair market value was
$188,562.50. The appraisal does not indicate petitioner Luke Gibson’s
basis in the property when he acquired it.
After the examination the IRS issued petitioners a Notice of
Deficiency dated July 18, 2023. The IRS determined that $5,710 of the
claimed deduction for noncash charitable contributions was allowed (the
amount from “paintball guns ammo masks” and “appliances baby furn
equi 3 yds decompressed granite misc”), but none of the noncash
charitable contribution of $188,563 related to the “high end cycling EQ
apparel” was deductible. With respect to the disallowed noncash
charitable deduction at issue, the Notice of Deficiency included the
following explanation:
A deduction for a contribution of property to a qualifying
organization is measured by the fair market value of the
property at the time the gift is made. The attached
3 The Court uses the term “IRS” to refer to administrative actions taken outside
of these proceedings. The Court uses the term “respondent” to refer to the
Commissioner of Internal Revenue, who is the head of the IRS and is respondent in
this case, and to refer to actions taken in connection with this case.
4 At calendar call petitioner Luke Gibson stated on the record that his wife,
who was not present, had agreed to allow him to speak for her.
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computation shows the value determined for the donated
property.
Your contribution of property (which, if sold on the date
contributed, would have resulted in ordinary income or
short-term capital gain) is deductible to the extent shown
in the attached computation.
Since the donated property consisted of inventory items,
the deduction is limited to your cost.
You are required to substantiate each reported
contribution. Since you did not substantiate all
contributions reported, we adjusted your deduction to the
amount verified or determined reasonable based on all
available information.
The amount shown on your return as a deduction for
charitable contributions is not allowable in full because it
has not been established that the total amount was paid
during the tax year or that the unallowable items meet the
requirements of Section 170 of the Internal Revenue Code.
....
To be allowed a deduction for property as a contribution,
you must show (a) the name and address of the qualifying
organization(s), (b) provide a list of what was donated, and
(c) show the fair market value of each item on the date of
contribution. Since you have not met these requirements,
we have adjusted the amount as shown.
Discussion
I. Burden of Proof
In general, the Commissioner’s determination set forth in a
Notice of Deficiency is presumed correct, and the taxpayer bears the
burden of proving that the determination is in error. Rule 142(a); Welch
v. Helvering, 290 U.S. 111, 115 (1933). Deductions are a matter of
legislative grace, and a taxpayer bears the burden of proving that he or
she is entitled to any deduction claimed. See Rule 142(a); INDOPCO,
Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v.
Helvering, 292 U.S. 435, 440 (1934). Under section 7491(a), the burden
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of proof may shift to the Commissioner if the taxpayer produces credible
evidence with respect to any relevant factual issue and meets other
requirements. Petitioners have not argued or established that section
7491(a) applies, and therefore the burden of proof remains with them.
A taxpayer claiming a deduction on a federal income tax return
must demonstrate that the deduction is provided for by statute and must
further substantiate that the expense to which the deduction relates has
been paid or incurred. Hradesky v. Commissioner, 65 T.C. 87, 89–90
(1975), aff’d per curiam, 540 F.2d 821 (5th Cir. 1976); Meneguzzo v.
Commissioner, 43 T.C. 824, 831–32 (1965). A taxpayer is required to
maintain records sufficient to enable the Commissioner to determine the
correct tax liability. See I.R.C. § 6001; Treas. Reg. § 1.6001-1(a). Such
records must substantiate both the amount and purpose of the related
expense. Higbee v. Commissioner, 116 T.C. 438, 440 (2001).
II. Noncash Charitable Deduction
A taxpayer may deduct charitable contributions made during a
taxable year. I.R.C. § 170(a)(1). However, deductions for charitable
contributions are allowed only if the taxpayer satisfies statutory and
regulatory substantiation requirements. See id.; Treas. Reg. § 1.170A-
13. There may be additional substantiation requirements depending on
the type and size of the contribution and on whether the contribution is
a gift of cash or property.
Noncash charitable contributions must be evidenced by a receipt
from the donee organization. See Treas. Reg. § 1.170A-13(b)(1). The
receipt must show (1) the name of the donee organization; (2) the date
and location of the contribution; and (3) the property description in
detail reasonably sufficient under the circumstances. Id. A receipt is
not required if the contribution is made in circumstances where it is
impractical to obtain a receipt. See id. The reliability of the records is
determined on the basis of all of the relevant facts and circumstances.
See id. subpara. (2). Treasury Regulation § 1.170A-13(b)(1)(iii) further
provides that “[a]lthough the fair market value of the property is one of
the circumstances to be taken into account in determining the amount
of detail to be included on the receipt, such value need not be stated on
the receipt.”
If the donation is a small amount, any written or other evidence
from the donee charitable organization acknowledging receipt is
generally sufficient. See id. para. (a)(2)(i)(C). Nevertheless,
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contributions of $250 or more require a contemporaneous donee written
acknowledgment containing specified information. See I.R.C.
§ 170(f)(8); Treas. Reg. § 1.170A-13(f). Furthermore, additional
information is required to support a deduction exceeding $500 for a
charitable contribution of property. Specifically, the taxpayer must also
maintain written records establishing (1) the item’s manner of
acquisition as well as either the item’s approximate date of acquisition
or the approximate date the property was substantially completed and
(2) the cost or other basis, adjusted as provided by section 1016, of
property donated by the taxpayer during the taxable year. See I.R.C.
§ 170(f)(11)(A)(i), (B); Treas. Reg. § 1.170A-13(b)(3)(i). If the deduction
for a charitable contribution of property exceeds $5,000, the taxpayer is
required to (1) obtain a qualified appraisal of the property, (2) attach a
copy of the appraisal summary to the tax return, and (3) maintain
records containing the information about the property and contribution.
See I.R.C. § 170(f)(11)(C); Treas. Reg. § 1.170A-13(c).
With the contemporaneous itemized receipt from Hiway 80
Rescue Mission Ministry petitioners met the requirements with respect
to contributions of $250 or more. See I.R.C. § 170(f)(8); Treas. Reg.
§ 1.170A-13(f). The parties do not dispute that this organization was a
charitable organization under section 170.
However, because the charitable contribution deduction in
dispute is $188,563, petitioners are required to meet further
substantiation requirements, as discussed above. Petitioners have
failed to do so.
Petitioners have failed to meet the requirements under section
170(f)(11)(A)(i) and (B) and Treasury Regulation § 1.170A-13(b)(3)(i)
with respect to noncash charitable contributions greater than $500;
namely, they have not explained how petitioner Luke Gibson acquired
the over 4,000 items of property, the approximate date of acquisition, or
the cost or other basis, adjusted as provided by section 1016, of the
property donated. Petitioner Luke Gibson’s testimony was vague as to
whom he received the donated property from as a gift. It was unclear
whether he inherited it, or whether the unnamed family member made
a gift during their lifetime. Petitioner Luke Gibson asserted that it was
impossible to get the value of the property in the hands of the family
member; yet when asked by the Court to explain why it would be
impossible, he said because it was a gift. To claim a deduction for
property the value of which exceeds $500 the law requires detailed
substantiation of the basis of the property as well as when the property
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was acquired. Petitioner Luke Gibson gave confusing testimony and at
one point suggested that he thought that the value for claiming a
deduction was the fair market value discounted by 25% to 50%. He did
not provide any support for this statement.
Further, the record does not confirm that Mr. Ruelle was a
qualified appraiser. Thus, petitioners have failed to meet the
requirements under section 170(f)(11)(C) and (E) and Treasury
Regulation § 1.170A-13(c) with respect to a deduction for a charitable
contribution of property exceeding $5,000 in value because they have
not proven that Mr. Ruelle was a qualified appraiser.
Accordingly, the Court agrees with respondent that petitioners
are not entitled to deduct $188,563 for noncash charitable contributions.
III. Conclusion
The Court has considered all the parties’ arguments and, to the
extent not addressed herein, the Court concludes that they are moot,
irrelevant, or without merit.
To reflect the foregoing,
Decision will be entered under Rule 155.