UNITED STATES TAX COURT
Agency decision
Ask Donna
What actually matters in this document.
Text
JMP
136 T.C. No.
25
UNITED STATES TAX COURT
JAN ELIZABETH VAN DUSEN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 20767-08.
Filed June 2, 2011.
P incurred unreimbursed volunteer expenses while
caring for foster~ cats in her private residence. P's
expenses consisted primarily of payments for veterinary
services, pet supplies, cleaning supplies, and household
utilities. P claimed a $12,068 charitable-contribution
deduction for the expenses on her 2004 tax return. R
issued a notice of deficiency denying the deduction. R
claims that P did not rend r services to a qualifying
charitable organization u er sec. 170(c), I.R.C., and
that P failed to substant te her expenses under sec.
170(f) (8),
I.R.C., and sec.
1.170A-13,
Income Tax Regs.
R also asserts that P's expenses have an
indistinguishable personal component.
Held: P's foster-cat expenses qualify as
unreimbursed expenditures incident to the rendition of
services to a charitable rganization. See sec.
1.170A-1(g), Income Tax R gs. P's services were
directed by a charitable Erganization. P thus rendered
services to a sec. 170(c), I.R.C., organization when she
SERVED Jun 02 2011
- 2 ||
cared for foster cats in her home. Some of P's expenses
are disallowed because they are insufficiently related
to foster-cat care or cannot be determined with
precision.
Held, further, the recordkeeping requirements of
sec. 1.170A-13 (a), Income Tax Regs. (for contributions
of money), govern unreimbursed volunteer expenses of
less than $250.
Held, further, P's records meet the requirements of
sec. 1.170A-13 (a),
Income Tax Regs., because they are
acceptable substitutes for canceled checks under the
substantial compliance doctrine. See Bodd v.
Commissioner,
100 T.C. 32
(1993).
P can deduct foster-
cat expenses of less than $250.
Held, further, P cannot deduct foster-cat expenses
of $250 or more.
P did not obtain the contemporaneous
written acknowledgment from the charitab e organization
required under sec.
1.170A-13(f) (10),
Ingome Tax Regs.
Held, further, P can deduct a $100 dheck donation
made to a separate charitable organization.
Jan Elizabeth Van Dusen, pro se.
Christina E. Ciu and Rebecca Duewer-Gren ille, for
respondent.
MORRISON, Judge:
The Commissioner of Inpernal Revenue (the
IRS) issued a notice of deficiency for the tak year 2004 to
petitioner, Jan Elizabeth Van Dusen, determin ng an income-tax
deficiency of $4,838.
The parties settled all issues except
|
|
il
- 3 those relating to a $12,068 charitable-contribution deduction for
Ms. Van Dusen's expenses of taking care of foster cats.1
We find that taking care of foster cats was a service
performed for Fix Our Ferals, a section 501(c) (3)2 organization
that specializes in the neutering of wild cats.
part I.
See infra
Some of Van Dusen's expenses are categorically not
related to taking care of foster cats and are therefore not
deductible.
These expenses ar
the cost of cremating a pet cat,
bar association dues, and DMV fees.
See infra part II.
Some of
Van Dusen's other expenses are not solely attributable to fostercat care and are not deductible.
These expenses are the cost of
repairing her wet/dry vacuum ar d her membership dues at a store.
See infra part III.
Other expenses are attributable to the
services Van Dusen provided to Fix Our Ferals.
These expenses
are 90 percent of her veterinary expenses and pet supplies and 50
percent of her cleaning supplies and utility bills.
See.infra
IThe charitable-contribution deduction for foster-cat
expenses was the only item the parties presented for decision.
The record, however, includes documentation of four expenses that
are unrelated to foster-cat cake. These expenses are:
the cost
of cremating a pet cat, bar asþociation dues, DMV fees, and a
$100 check to Island Cat Resources and Adoption. Van Dusen
testified about the pet cat cremation and the $100 check to
Island Cat Resources and Adoption, but not the bar association
dues or DMV fees. We address all of these expenses for the sake
of completeness.
2Unless otherwise indicated, all section references are to
the Internal Revenue Code in.effect for the year at issue. All
Rule references are to the Tax Court Rules of Practice and
Procedure.
part IV.B.
Some payments to Orchard Supply Hardware and Lowe's
|
for pet supplies, however, are disallowed because the amounts
spent on pet supplies cannot be determined with precision.
infra part IV.A.
See
In deciding whether Van Dusen kept adequate
records of the expenses attributable to her
plunteer services,
we hold that the regulatory requirements. for
oney contributions
govern Van Dusen's expenses of less than $250.
See infra part
IV.C.1.a.
Van Dusen has met the requirements for these less-
than-$250 expenses.
Her records are acceptab e substitutes for
canceled checks under the substantial compliance doctrine.
infra part IV.C.1.b.
See
For expenses of $250 or more, however, Van
Dusen does not have contemporaneous written acknowledgment from
Fix Our Ferals.
See infra part IV.C.2.
Therefore, these
expenses are not deductible.
Il
We also hold that Van Dusen is entitled to a $100 deduction
for a check donation to Island Cat Resources and Adoption, a
section 170(c) organization.
See infra part VI.
FINDINGS OF FACT
We adopt the stipulation of facts and it
attached exhibits.
Van Dusen, a resident of Oakland, California, is an attorney who
cared for cats in her private residence in 2004.
volunteered for an organization called Fix Ou
Van Dusen
Ferals and argues
that her out-of-pocket expenses for caring for cats qualify as
charitable contributions to that organization
The parties
- 5 stipulate that Fix Our Ferals is a section 501(c) (3)
organization.
We find that Fix Our Ferals is eligible to receive
tax-deductible contributions under section 170(c).3
Fix Our Ferals and Trap-Neuter-Return
Fix Our Ferals' mission is to engage in "trap-neuter-return"
activities, which consist of t apping feral cats,4 neuterings
them, obtaining necessary medi al treatments and vaccinations,
and releasing them back into t e wild.'
volunteers to perform these tasks.
Fix Our Ferals enlists
The volunteers usually return
cats to their original neighborhoods, but sometimes cats are
moved to safer neighborhoods.
The purpose of trap-neuter-return is to humanely control
feral cat populations and ensure 'that the cats live in an
environment where people are n t hostile to them.
Fix Our Ferals
3We take judicial notice of IRS Publication 78, Cumulative
List of Organizations described in Section 170(c) of the Internal
Revenue Code of 1986, as effective for 2004. See Viralam v.
Commissioner,
136 T.C.
,
,
(2011)
(slip op. at 6, 43)
(citing IRS Publication 78 as évidence of organization's sec.
170(c) status); Jennings v. Commissioner, T.C. Memo. 2000-366
(same), affd.
19 Fed. Appx. 351
was listed in IRS Publication
(6th Cir. 2001).
Fix Our Ferals
8 in 2004.
4A feral cat is a nondomesticated cat.
s"Neutering" refers to th sterilization of animals of both
sexes. We use the term interchangeably with "spay/neuter".
GIn the context of trap-neuter-return, returning feral cats
to the "wild" means returning hem to an outdoor living
environment that is generally urban or suburban. The intent is
for the cats to continue to live in human-populated
neighborhoods, rather than move to animal-only habitats.
- 6 periodically organizes spay/neuter clinics and educates the
public about trap-neuter-return as a solution to neighborhood cat
issues.
After being neutered, the cats must be t mporarily housed in
volunteers' private residences while they recbver.
After the
li
cats recover and have received all necessary
edical treatments,
they are usually returned to the wild.
Some cats cannot be safely returned to the wild.
Typically
those cats are young, sick, injured, elderly, or tame.'
cats must be cared for domestically.
We refe
Those
to all care for
trapped cats, including temporary housing whi e cats are
recuperating from neutering, as "foster care"
We refer to cats
under foster care as "foster cats".
Some of the cats are not returned to the wild because they
are already tame.
Volunteers try to tame the other cats that
cannot be returned to the wild to make them s itable for
adoption.
The volunteers then attempt to place the tame cats in
no-kill shelters or adoptive homes.
The succ ss of placing the
tame cats depends on shelter availability and people's
willingness to adopt.
Although some of the cats that cannot be returned to the
wild are adopted or given to shelters, others remain in foster
?Sometimes volunteers capture tame stray cats when they
attempt to trap feral cats.
- 7 care indefinitely.
More often these cats are sick, elderly, or
have other problems requiring long-term care.
Fix Our Ferals
encourages volunteers to provide long-term care for these cats in
their homes.
Foster care,« both short and long term, forms an
important part of the organization's mission.
Fix Our Ferals' Administrative |Structure
Fix Our Ferals is a decentaralized organization.
formal administrative office.
It has -no
Instead, it uses a post office
box, a telephone hotline, a website, and other internet- and
phone-based methods of communication.
Fix Our Ferals' official staff, as far as we can surmise,
consists of a board of directors and a team'of veterinarians.
The organization relies on a base of volunteers who trap cats,
transport cats, foster cats, staff spay/neuter clinics, educate
the public, screen phone calls
volunteers.
raise funds, and recruit
Some Fix Our Ferals volunteers are.members of an
informal internet message group through which they- coordinate
logistics and assist each other with cat-related issues.
Volunteers also collaborate informally with other cat rescue
groups and individuals.
Fix Our Ferals does not commonly
reimburse volunteers for expenses:
It does, however, sometimes
provide vouchers for free neutering services.
It also reimburses
volunteers for emergency care if complications arise after a cat
has been neutered at a Fix Our Ferals clinic.
l
- 8 Van Dusen's Role With Fix Our Ferals
Van Dusen was a Fix Our Ferals voluntee
in 2004.
She
trapped feral cats, had them neutered, obtai ed vaccinations and
necessary medical treatments, housed them while they recuperated,
and released them back into the wild.
She also provided long-
term foster care to cats in her home.
She at empted to place
long-term foster cats in one of two no-kill shelters, Berkeley
II
East Bay Humane Society or East Bay Society fþr the Prevention of
Cruelty to Animals," or otherwise find them a4optive homes.
Some
foster cats, however, stayed with her indefin tely.
In 2004, Van Dusen had between 70 and 80 cats total, of
which approximately 7 were pets.
foster cats generally did not.
The pet cats had names, but the
Most cats roamed freely around
Van Dusen's home (except for bathrooms) and rgsided in common
areas.
Less domësticated cats stayed in a separate room called
the "feral room".
Some cats lived in cages for taming.
Others
lived in cages because of illness.
Van Dusen devoted essentially her entire life outside of
work to caring for the cats.
looked after the cats.
Each day she fe , cleaned, and
She laundered the cat ' bedding and
sanitized the floors, household surfaces, and cages.
Van Dusen
even purchased a house "with the idea of fost ring in mind".
Her
I.
sVan Dusen and other witnesses sometimes referred to this
organization as Oakland Society for the Prevention of Cruelty to
Animals.
|
l
-
9
-
house was so extensively used for cat care that she never had
guests over for dinner.
Van Dusen obtained foster cats primarily through the trapneuter-return work that she personally performed.
She captured
homeless cats, had them neutered, cared for them during recovery,
and if possible, returned them to the wild.
She housed the cats
that could not be returned to the wild until an adoption
opportunity arose.
She obtained the rest of her cats through a
loose network of contacts.
So e came from Fix Our Ferals
affiliates or from the Fix Our Ferals hotline or internet message
group.
Others came from indiv: dual volunteers or¯ other cat
rescue organizations.
Van Dusen's foster care arrangements arose informally,
usually by her personal decisi n or through a series of phone
calls, emails, internet postings, or in-person conversations.
Some cats that she cared for in 2004 had been under her care in
previous years, during which she belonged to organizations other
than Fix Our Ferals.
Van Duse 's inability to recall precisely
how she acquired each of her cats makes it difficult to ascertain
how many cats are attributable to a particular organization or
contact person.
Although Fix
ur Ferals was her primary
volunteer affiliation in 2004, she admits that she did sometimes
assist other groups that year.
Van Dusen therefore cannot trace
all her foster cats in 2004 to Fix Our Ferals.
il
- 10 -
Van Dusen's Cat-Care Expenses
Van Dusen paid out-of-pocket for most o
expenses.
her cat-care
Vouchers covered some of the neuterings, but Van Dusen
paid all other veterinary expenses including tests, treatment,
vaccines, and surgery.
Van Dusen expended significant amounts
well.
n in-home care as
She purchased large quantities of pet ||supplies
cleaning supplies."
and
She renewed her Costco gembership so she
could buy cat food and cleaning supplies at 1 wer prices.
She
repaired her wet/dry vacuum so she could easily clean the floors.
Van Dusen incurred higher electricity and gas bills because she
||
laundered many loads of cat bedding and ran a special ventilation
system to ensure fresh air.
The frequent lauhdering also
increased her water bills.
Her garbage bills increased because
of the high volume of cat-related waste.
We
efer to Van Dusen's
veterinary, pet supply, cleaning supply, utility, Costco
membership renewal, and wet/dry vacuum repair expenses
collectively as her "cat-care expenses".
A portion of Van Dusen's cat-care expens s was attributable
11
to personal use, and the rest was attributabl
to foster cats.
9"Pet supplies" refers to pet food, pet dedicine, woodstove
pellets (for cat litter), litter boxes, pet dishes, and other
miscellaneous cat-specific supplies.
""Cleaning supplies" refers to garbage begs, paper towels,
laundry detergent, dish detergent, and other cat-related supplies
that were not exclusively used for cats.
I
- 11 -
We refer to the portion of cat-care expenses attributable to
foster cats as "foster-cat expenses".
The precise amount of Van
Dusen' s foster-cat expenses is unclear because her records do not
distinguish personal expenses from foster-cat expenses."
Van Dusen' s Recordkeeping and Peporting
van Dusen introduced the f ollowing evidence as proof of her
foster-cat expenses:
check copies," bank account statements,
credit card statements, a Thornhill Pet Hospital client account
history, a Costco purchase hist ory, Pacific Gas & Electric
invoices, a Waste Management p yment history (for.garbage
removal) , and an East Bay Municipal Utility District billing
history (for water) .
All the data in the documents was recorded
contemporaneously in 2004.
Van Dusen states that she initially
had more substantial records of her foster-cat expenses, namely
itemized receipts, but that her tax preparer, Cary Cheng, told
her they were unnecessary for
reparing her original return.
Those records have since disappeared.
Van Dusen compiled the
documents she introduced at tr tal by searching through other
records and requesting records from third parties.
"We address the calculat'on of foster-cat expenses infra
pts. III and IV.
"We refer to the documen s as "check copies" because they
are photocopies of carbon copies of the original checks. After
writing the checks, Van Dusen presumably kept the carbon copies
for her records.
- 12 -
On her 2004 tax return, Van Dusen deducted $12,068 on
Schedule A, Itemized Deductions, for noncash charitable
contributions attributable to a "cat rescue dperation".
The
II
return stated that the $12,068 comprised $1,381 of supplies,"
$9,607 of veterinary bills, and $1,080 of utilities.
It is
unclear precisely how van Dusen arrived at these numbers.
An
unnamed friend had totaled the "cat rescue op ration" expenses
using now-missing receipts, but we have no evidence of what
||
method, if any, her friend used to separate deductible expenses
from nondeductible expenses.
The friend prepared a worksheet
summarizing the calculations, but this documeht is not in
evidence.
The IRS disallowed the entire deduption.
Van Dusen's
petition asserts that she is entitled to a de uction of at least
$12,068 for foster-cat expenses.
On the basis of her testimony,
we believe van Dusen now seeks a deduction fob the expenses using
the following percentage estimates:
|
90 percent of veterinary
expenses, pet supplies, paper towels, and gar age bags; and 50
percent of laundry detergent, dish detergent, utilities, and
Costco membership renewal.
See infra part IV.B.
Van Dusen also
"It is unclear whether "supplies" referred to just pet
supplies and cleaning supplies or whether it also included the
cost of renewing Van Dusen's Costco membership and the cost of
repairing her wet/dry vacuum. At trial Van Düsen made clear that
she seeks a deduction for all of these expenses--pet supplies,
cleaning supplies, Costco membership renewal, and wet/dry vacuum
repair.
'I
- 13 -
seeks to deduct the cost of her wet/dry vacuum repair, but her
percentage estimate for this expense is unclear.
OPINION
A taxpayer has the burden of proving the IRS's determination
of deficiencies incorrect.
Helvering,
290 U.S. 11-1,
See Rule 142(a) (1); Welch v.
115
(1933).
The burden shifts to the
IRS if the taxpayer introduces credible evidence with respect to
a factual issue, the taxpayer has complied with the
substantiation requirements of the Internal Revenue Code, the
taxpayer has maintained all required records, and the taxpayer
has cooperated with reàsonable IRS requests for information.
Sec. 7491(a).
Our conclusions here, however, are based on the
preponderance of the evidence, and thus the allocation of the
burden of proof is immaterial.
Commissioner,
I.
110 T.C.
See Martin Ice Cream Co. v.
189, 210 n.16
(1998).
Caring for Foster Cats Was a Service to Fix Our Ferals.
Section 170(a) allows a d duction for any "charitable
contribution" made by the taxp yer.
is defined as "a contribution
charitable organization.
A "charitable contribution"
r gift to or for the use of" a
Sec. 170(c).
A typical charitable
contribution is donating money or property directly to a
charitable organization.
A second type of charitable
contribution is placing money
charitable organization.
r property in trust for a
Such a transfer is, in the words of
||
- 14 section 170(c), a contribution "for the use qf" a charitable
organization.
(1990).
See Davis v. United States, 495 U.S. 472, 485
A third type of charitable contribution occurs when a
taxpayer performing services for a charitable organization incurs
unreimbursed expenses.
states:
As section 1.170A-1(g), Income Tax Regs.,
"No deduction is allowable under section 170 for a
contribution of services.
However, unreimbursed expenditures
made incident to the rendition of services to an organization
contributions to which are deductible may constitute a deductible
contribution.""
Van Dusen did not contribute money or property directly to
Fix Our Ferals.
Van Dusen did not place property in trust for
Fix Our Ferals or enter into a formal arrangegent giving the
organization legal rights to her property.
Instead she paid
third parties for veterinary services, pet supplies, cleaning
supplies, utilities, Costco membership renewa , and wet/dry
"The expenses of rendering services are deductible because
they constitute contributions "to" the charitable organization.
Rockefeller v. Commissioner,
676 F.2d 35,
42
(2d Cir.
1982)
(in
determining whether unreimbursed volunteer expenses were governed
by a statutory provision of the 1954 Code that treated favorably
contributions "to" a charitable organization, court held that
unreimbursed volunteer expenses were contributions "to"--not "for
the use of"--a charitable organization), affg. 76 T.C. 178
(1981); see also Davis v. United States, 495 U.S. 472, 486-488
(1990) (in holding that no deduction is available when a taxpayer
pays a service provider's expenses, court sta ed that
unreimbursed expenses of rendering services are contributions
"to" a charitable organization within the meaning of section
170(c)).
- 15 vacuum repair.
Thus Van Dusen is entitled to a charitable-
contribution deduction only if these expenses were, in the words
of section 1.170A-1(g),
Income Tax Regs.,
"expenditures made
incident to the rendition of services" to Fix Our Ferals.
The IRS contends that Van Dusen was an independent cat
rescue worker whose services were unrelated to Fix Our Ferals and
did not benefit the organization.
We reject this assertion,
finding that Van Dusen's care for foster cats constituted
services to Fix Our Ferals.
In determining whether a taxpayer has provided services to a
particular organization, courts consider the strength of the
taxpayer's affiliation with the organization, the organization's
ability to initiate or request services from the taxpayer, the
organization's supervision over the taxpayer's work, and the
taxpayer's accountability to the organization.
v..Commissioner, 60 T.C. 988
T.C. 722
(1970).
See, e.g., Smith
(L973); Saltzman v. Commissioner, 54
For example, Smith v. Commissioner, supra at
993-995, held that church members could deduct evangelism travel
expenses even though their church never initiated, controlled,
supervised, or assisted with the trips.
The church encouraged
missionary work in general; and before the taxpayers embarked on
a trip, the church gave them letters of commendation, which
evidenced the church's approval and served as introductions to
intrafaith groups during the trip.
Id. at 993.
Additionally,
- 16 after each trip the church members reported back to the church,
which then publicized their efforts and accomplishments to other
congregations.
Id.
By contrast, in Saltzman v. Commissioner,
supra, the taxpayer's activities had much loo er ties to the
charitable organization.
The taxpayer was th
Harvard-Radcliffe Hillel Folk Dance Group.
leader of the
Id. at 722.
Without
the organization's asking him, he traveled alone to Europe and
Pittsburgh to attend folk dance festivals that were not sponsored
by the organization.
Id. at 723.
We held thàt the taxpayer had
not provided services to the organization, pa tly because the
organization had not directed or encouraged him to attend the
festivals.
Id_ at 724.
Van Dusen has demonstrated a strong conn ction with Fix Our
I
Ferals.
She was a regular Fix Our Ferals vol nteer who performed
substantial services for the organization in 2004.
She engaged
in both trapping and foster care and worked closely with other
Fix Our Ferals volunteers.
Fix Our Ferals co ld initiate or
I
request services from Van Dusen- through indiv dual volunteers,
who would contact her by phone or by internet "
Like the church
in Smith, Fix Our Ferals encouraged and indir ctly oversaw Van
Dusen's work.
See Smith v. Commissioner, supra at 994 ("Nothing
I
"Fix Our Ferals volunteers regularly received requests for
assistance and would solicit help from other volunteers on behalf
of third parties.
If volunteers encountered broblems during
their work, they would also contact other volanteers for
assistance.
- 17 -
in section 170 or in section 1.170-2(a) (2) of the regulations
* * * suggests that, as a condition to the deductibility of
unreimbursed, service-related expenses, the services must be
performed under the control or supervision of the charitable
organization.")."
Van Dusen's inability to t race her cat rescue work
exclusively to Fix Our Ferals does not pose an insurmountable bar
to deductibility.
We find tha
2004 for Fix Our Ferals.
she performed most of her work in
More ver, all of the other
organizations with which she was affiliated, and therefore to
which she may have provided services, qualify as section 170(c)
organizations."
The IRS also contends that even if Van Dusen was affiliated
with Fix Our Ferals, Fix Our Ferals' mission consists solely of
"education and sterilization", and therefore fostering cats could
not constitute services to Fix Our Ferals.
As our fact findings
"Sec. 1.170-2(a) (2), Income Tax Regs., was the predecessor
to sec. 1.170A-1(g), Income Tax Regs., the provision that
currently allows taxpayers to Neduct unreimbursed volunteer
expenses.
"These organizations are:
Island Cat Resources and
Adoption, Berkeley East Bay Hunane Society, East Bay Society for
the Prevention of Cruelty to Animals, and Second Chance Cat
Rescue. All of these organizations were listed in IRS
Publication 78 in 2004. See Jennings v. Commissioner, T.C. Memo.
2000-366 (concluding that donebs were not sec. 170(c)
organizations because they were not listed in IRS .Publication
78); supra note 3 (taking judicial notice of IRS Publication 78,
a cumulative list of sec. 170(2) organizations).
.I
- 18 -
explained, however, the organization's mission encompasses foster
care.
Fix Our Ferals actively recruits volunteers to foster cats
during spay/neuter recovery, and it encourages volunteers to
provide sanctuary for cats requiring long-term care.
Thus Van
Dusen served Fix Our Ferals' mission by foste ing cats.
remainder of this Opinion considers which of
The
an Dusen' s expenses
are deductible as incidental to foster-cat volunteer work.
||
II.
Pet-Cat Cremation Expense, Bar Associatiön Dues, and DMV
Fees
|
As we have found, Van Dusen rendered services to Fix Our
Ferals.
To be deductible, unreimbursed expenses must be directly
connected with and solely attributable to the rendition of
services to a charitable organization.
E.g., Saltzman v.
Commissioner, 54 T.C. at 724; Babilonia v. Cornmissioner, T.C.
Memo.
1980-207,
affd. per curiam 681 F.2d 678
(9th Cir.
1982).
In applying this standard, courts have considëred whether the
||
charitable work caused or necessitated the taxpayer's expenses.
For example,
in Orr v. United States,
343 F.2d 553,
557-558
(5th
Cir. 1965), the court disallowed deductions fèr the expenses of
insuring and repairing two vehicles because t e expenses were not
solely attributable to charitable use.
The t xpayer had used the
vehicles partly for personal use and would ha e incurred the
expenses regardless of any charitable work.
Similarly, in
McCollum v. Commissioner, T.C. Memo. 1978-435, we denied National
Ski Patrol volunteers' deductions for ski equ pment because the
- 19 volunteers owned the.equipment and could use it for personal
recreation.
We also denied deductions for motor home use and
food given to non-volunteering family members.
Id.
And in Smith
v. Commissioner, 60 T.C. at 995, we disallowed meal, laundry, and
camping expenses incurred for
on-proselytizing children who had
accompanied the taxpayers on an evangelical mission.
Van Dusen's documentation includes the following non-foster-
cat expenses:
an $85 credit card charge to Bubbling Well Pet
Memorial, a $170 check to the California State Bar Association,
and a $146 check to the "DMV".
The $85 charge to Bubbling Well
Pet Memorial is not deductible because this expense was for the
cremation of a pet cat.
The checks to the California State Bar
Association and the DMV are not deductible because they are not
charitable expenses.
III. Costco Membership Dues and Wet/Dry Vacuum Repair
Van Dusen has not shown that any portion of her Costco
membership dues or wet/dry vacuum repair costs constitutes an
exclusively charitable expense
Like the vehicles in Orr v.
United States, supra, the Cost o membership and the wet/dry
vacuum served both personal and charitable purposes.
We conclude
that Van Dusen would have paid for her Costco membership and
repaired her vacuum even if she had not fostered cats.
Thus
these expenses were not directly connected with and solely
attributable to charitable activities.
- 20 IV.
Veterinary Expenses, Pet Supplies, Cleaning Supplies," and
Utilities
One broad category of Van Dusen's expenses--veterinary
expenses, pet supplies, cleaning supplies, and utilities--was
I
partly incidental to her services to Fix Our Ferals.
If Van
Dusen had not fostered cats, she would have paid for fewer
'I
|
veterinary services, fewer pet supplies, and fewer cleaning
supplies.
Her utility bills would have been significantly lower
il
because she would not have had to run a special ventilation
system, do as much laundry, or dispose of as much cat waste.
We
I
find that the portions of these expenses attributable to caring
for foster cats were directly connected with änd solely
attributable to Van Dusen's services to Fix 0 r Ferals.
A.
Some Payments to Orchard Supply Hardware and Lowe's
Must Be Categorically Disallowed.
Van Dusen purchased bags of woodstove pe lets from Orchard
Supply Hardware and Lowe's.
litter.
She used woodstote pellets as cat
Unfortunately, Van Dusen's documents show only the.total
payment she made for each visit to these stores.
do not reveal what items she purchased."
Her documents
Thus the documents
"See definitions of "pet supplies" and "pleaning supplies",
supra notes 9 and 10.
"Van Dusen had other payees besides Orch rd Supply Hardware
and Lowe's. For one of the other payees--Costco--Van Dusen
introduced a document that described each ite she purchased.
For the other payees, Van Dusen does not have documents showing
what items she purchased, but this fact is insignificant because
(continued...)
21 -
alone do not show how much she spent on pellets.
She does not
claim that she purchased any other items whose costs would be
deductible.
We therefore must determine, on the basis of her
testimony, what portions of her payments to the two stores were
for pellets.
In determining the amounts that Van Dusen spent on pellets
from Orchard Supply Hardware and Lowe's, we divide her shopping
trips to these stores into two types.
With the first type of
shopping trip, the amount of each payment was an exact multiple
of $4.55625, the price of one bag of pellets."
The payments for
this type of trip are:
•
check nos.
1405,
142 ,
1433,
1451,
and 1461; and
•
Orchard Supply HardwAre purchases on October 12,
October 19, November 22, and November 30, 2004, as
reflected in Van Dusen's bank statements.
We believe that, on the first type of shopping trip, Van Dusen
indeed purchased bags of pellets and nothing else.
"(...continued)
it is evident that the payments were entirely related to cat
care. For example, her paymen s to a veterinarian were entirely
for cat medical care.
"We determined the per-ba cost of pellets by dividing
$36.45 by 8. Van Dusen testified credibly that the cost of eight
bags of pellets in 2004 was $3 .45.' This amount appeared
frequently in her documentation as the amount she paid to
Orchard Supply Hardware. We b lieve that the amount $36.45
includes the sales tax on the purchase, which is why dividing
$36.45 by 8 yields a number that includes a fraction of a penny
(as opposed to a round number).
- 22 -
|
With the second type of shopping trip, the amount of each
payment was not an exact multiple of the $4.55625 price of a bag
of pellets.
For each trip, -Van Dusen testified as to how much
she spent on pellets.
She claimed that she either (1) purchased
eight bags of pellets for $36.45 ($4.55625/bag x 8 bags), or (2)
purchased the maximum number of bags of pellets that could have
been purchased with the dollar amount spent."
While we generally
find Van Dusen a credible witness, Van Dusen
rovides no basis
for us to presume that every trip involved th
purchase of either
(1) eight bags of pellets, or (2) as many bags of pellets as
could be purchased by the payment amount reflected on her
documentation."
Therefore, we exclude the following payments
from calculation:
•
check nos. 1215, 1225, 1234, 1253,
1351, 1368, 1382, 1389, and 1478;
289,
1335,
1341,
'l
"For instance, check no. 1341 shows Van Dusen paid $33.52
to Orchard Supply Hardware. Van Dusen testified that on the
check no. 1341 shopping trip, she bought seven bags of pellets
for $31.90 (and presumably spent the remaining $1.62 on other
things). She apparently computed the $31.90 amount by
multiplying $4.55625 by 7. The product of 7 gnd $4.55625 turns
out to be $31.89375, which, rounded to the nearest cent, is
$31.89.
"We believe Van Dusen chose eight bags of pellets as an
estimate because the cost of eight bags--$36. 5--is the most
common amount in her documentation for orchar Supply Hardware
purchases. However, we are not convinced that Van Dusen
purchased eight bags of pellets so regularly hat $36.45 can be
used as a default estimate for shopping trips
!
11
- 23 -
•
Orchard Supply Hardware purchases on May 15 and June 6,
2004, as reflected in Van Dusen's credit card
statements;" and
•
an Orchard Supply Hardware purchase on October 6, 2004,
as reflected in Van Dusen's bank statements.
B.
Percentages of Veterinary Expenses, Pet Supplies,
Cleaning Supplies, and Utility Bills Attributable to
Foster-Cat Care
Of the expenses for veterinary care, pet supplies, cleaning
supplies, and household utilities, we have explained that some of
the expenses (i.e., some of the Orchard Supply Hardware and
Lowe's purchases) must be disallowed entirely.
Of the remaining
amounts, we must consider what portions were attributable to
foster-cat care.
Van Dusen est.imates that foster cats were
responsible for the following percentages of expenses:
•
90 percent of veterimary expenses,
•
90 percent of pet supplies,
•
90 percent of paper towels and garbage bags,
•
50 percent of laundro detergent and dish detergent, and
•
50 percent of household utility bills.24
"Unless otherwise stated, dates regarding Van Dusen's
credit card statements refer to the transaction date, not the
posting date.
24Van Dusen also estimates that 50 percent of the cost of
her Costco membership renewal was attributable to foster cats.
We do not discuss the Costco membership renewal here because we
find that no portion of it was attributable to foster cats. See
supra pt. III.
For the same reason, we do not discuss the
wet/dry vacuum repair (for whi h Van Dusen's percentage estimate
is unclear).
- 24 Van Dusen's percentage estimates for veterinary expenses and
pet supplies are reasonable.
Van Dusen had about 7 pet cats and
70 to 80 total cats in 2004.
In general, the cat-care costs were
distributed equally among pet cats and foster cats."
Thus we
conclude that approximately 90 percent of the veterinary and pet
supply expenses was attributable to foster cats.
We determine that 50 percent of Van Dusen's cleaning supply
and ut-ility expenses was attributable to foster cats.
Van Dusen
believes the foster cats actually accounted fþr around 75
||
percent, 80 percent, or even 90 percent of her cleaning and
utility expenses.
However, she cannot prove precisely how much
the foster cats contributed to these expenses.
We determine that
all the cleaning supplies--paper towels, garbage bags, laundry
detergent, and dish detergent--should be counted using the same
percentage estimate.
Van Dusen has not shown why paper towels
and garbage bags had a smaller personal use c mponent than
laundry detergent and dish detergent.
We consider 50 percent
sufficiently conservative estimate to ensure that no personal
||
expenses are counted.
Van Dusen ran a large-scale foster cat
'I
operation.
The number of cats in her home caused considerable
"Van Dusen testified that the foster cats caused a
disproportionate amount of the veterinary exp nses. However, she
has not indicated a basis for determining the precise percentage
of veterinary expenses attributable to foster cats. We therefore
treat veterinary expenses as if they were incurred proportionally
between pet cats and foster cats.
I
- 25 -
expenses.
She laundered beddir.g several times a week, and she
frequently sanitized floors anc surfaces.
She also ran a special
ventilation system and disposec of all cat-related waste.
these circumstances, it seems
Under
ighly unlikely that foster cats
accounted for less than 50 percent of her cleaning and utility
expenses.
We find that 90 percent of the veterinary expenses, 90
percent of the pet supplies, 50 percent of the cleaning supplies,
and 50 percent of the utility bills are foster-cat expenses and
therefore charitable.
These percentage estimates apply to
Orchard Supply Hardware and Lowe' s expenses only to the extent
that Van Dusen's documentation provides a precise amount for each
cat-care expense.
See supra part IV.A.
The table below lists
Van Dusen's payees and the expense category into which we
classify Van Dusen's payments to them (i.e., veterinary expenses,
pet supplies, cleaning supplie:3, or utilities) :
Payee
Foster-Cat Expense Category
Thornhill Pet Hospital
Veterinary expenses
St. Louis Vet Clinic
Veterinary expenses or pet
suppliesi
Bay Area Veterinary Specialist
Veterinary expenses
Berkeley Dog and Cat Hospital
Veterinary expenses
Deanne Jarvis
Veterinary expenses
Revival Animal Health
Veterinary expenses or pet
suppliesi
Orchard Supply Hardware
Pet supplies
Lowe's
Pet supplies
!
- 26 Pet Vet Pet Food
Veterina y expenses or pet
supplies1
Pet Club
Pet supplies
Costco
Pet supplies or cleaning
suppliès (item by item)
Pacific Gas & Electric
Utilities
Waste Management
Utilitie
East Bay Municipal Utility
District
Utilities
IIt is unnecessary to determine the precise cate ory under which each
payment falls because both veterinary expenses and pet supplies are 90 percent
chari t able .
Van Dusen's foster-cat expenses, however, are deductible only to
the extent that she has substantiated them, a point we consider
next .
C.
Whether Van Dusen' s Expenses Are Adequately
Substantiated
Charitable deductions are subject to the recordkeeping
requirements of section 1.170A-13(a), Income Tax Regs., for
contributions of money, or section 1.170A-13 ( ) , Income Tax
Regs., for contributions of non-money propert .
Contributions of
$250 or more must satisfy not only these recordkeeping
requirements, but also the requirements of seation
1.170A-13 (f ) (1) , Income Tax Regs . "
Therefore, we divide Van
Dusen's expenses into expenses of less than $250 and expenses of
|
I!
"The requirements of sec. 1.170A-13 (f) (1) , Income Tax
Regs., do not apply to separate contributions of less than $250
made to the same donee, even if the aggregate donations to the
donee exceed $250 within the same taxable year.
- 27 -
$250 or more.
We evaluate whet-her each expense satisfies the
requirements for its category.
1.
Van Dusen Has Met the Recordkeeping Requirements
for Her Foster-Éat Expenses of Less Than $250.
a.
Unreimbursed Volunteer Expenses of Less Than
$250 Are Geverned by Section 1.170A-13(a),
Income Tax Reqs., Not Section 1.170A-13 (b),
Income Tax Regs.
Section 1.170A-13, Income Tax Regs., divides contributions
of less than $250 into only two categories:
"contributions of
money" and "contributions of proßerty other than money".
sec. 1.170A-13 (a) and (b), Income Tax Regs.
See
The regulations do
not expressly state whether a contribution through the payment of
unreimbursed volunteer expenses is subject to the requirements
for contributing money set forth in section 1.170A-13(a), Income
Tax Regs., the requirements fo
contributing non-money property
set forth in section 1.170A-13(b), Income Tax Regs., or neither
set of requirements.
The idea that unreimbursed volunteer
expenses are free from recordkeeping requirements is implausible.
Therefore, one of the two sets of rules must govern those
expenses.
Of the two sets of recordkeeping rules, we hold that section
1.170A-13(a), Income Tax Regs.--which sets forth the
recordkeeping rules for money contributions--contains the
relevant rules for determinin
expenses are deductible.
whether unreimbursed volunteer
These rules, and not the rules for non-
- 28 -
money contributions, apply to unreimbursed voiunteer expenses for
several reasons."
First, the substantiation
equirements for
expenses of $250 or more, which are found in
ection
1.170A-13(f) (10), Income Tax Regs., implicitly categorize
unreimbursed expenses as cash contributions by subjecting them to
the requirements of section 1.170A-13(a), Incème Tax Regs."
Second, unreimbursed expenses are similar to money contributions
because taxpayers who serve as volunteers usuÅlly use money to
il
purchase goods. or services."
Third, if the rules for non-money
"In Cavalaris v. Commissioner, T.C. Memo 1996-308, we
cited sec. 1.170A-13(a), Income Tax Regs., wi hout further
analysis, in considering the deductibility of unreimbursed
volunteer expenses.
"For contributions of $250 or more,
sec. 1.170A-13(f) (1),
Income Tax Regs., requires the taxpayer to acauire and maintain
the charity's written acknowledgment of the côntribution. Such
an acknowledgment must include "The amount of any cash the
taxpayer paid and a description (but not necessarily the value)
of any property other than cash the taxpayer transferred to the
donee organization".
Sec. 1.170A-13(f) (2),
IÀcome Tax Regs.
However, for taxpayers who incur unreimbursed expenditures
incident to the rendition of charitable services, sec.
1.170A-13(f) (10), Income Tax Regs., provides hat the required
acknowledgment need only include a "descripti n of the services
provided by the taxpayer", so long as the taxýayer has adequate
records under sec. 1.170A-13 (a), Income Tax Rëgs., "to
substantiate the amount of the expenditures".
"The IRS treats unreimbursed volunteer expenses as cash
contributions in instructing taxpayers how to,complete their
returns. The IRS instructions for Form 8283, Noncash Charitable
Contributions, instruct taxpayers not to use he form for out-ofpocket volunteer expenses. Instead the instr4ctions tell
taxpayers to treat out-of-pocket expenses as eash contributions.
IRS instructions, however, generally carry no authoritative
weight.
See Merlo v. Commissioner,
126 T.C.
05,
211 n.10
(continued...)
- 29 -
contributions in section 1.170A-13 (b), Income Tax Regs., were
interpreted to govern unreimbursed volunteer expenses, they would
require information that would not be helpful in a subsequent'
audit or litigation about the propriety of a charitable-
contribution deduction.
41 (1993)
See Bond v. Commissioner, 100 T.C. 32,
("the reporting requirements of section 1.170A-13,
Income Tax Regs., are helpful to.* * *
[the IRS) in the
processing and auditing of returns on which charitable deductions
are claimed").
The rules for non-money contributions require a
taxpayer who lacks a donee rec ipt to keep written records of:
•
the value of the property,
•
the cost of the property,
•
any previous contributions by the taxpayer of a partial
interest in the contributed property, and
•
any restrictions the taxpayer has placed on the use of
the property.
"(...continued)
(2006), affd. 492 F.3d 618 (5th Cir. 2007); Zimmerman v.
Commissioner, 71 T.C. 367, 371 (1978), affd. without published
opinion 614 F.2d 1294 (2d Cir. 1979).
- 30 Sec. 1.170A-13 (b) (2) (ii), Income Tax Regs."
These facts are
generally irrelevant to the deductibility of unreimbursed
volunteer expenses.
Such expenses involve a monetary payment by
the taxpayer for which the taxpayer seeks a d duction equal to
the monetary outlay.
We conclude that the re ordkeeping
requirements for money contributions in section 1.170A-13 (a),
Income Tax Regs., govern Van Dusen's foster-cat expenses."
'I
"If a taxpayer contributing non-money prþperty has a
receipt from the donee organization, the receipt need only
contain:
(i) the name of the donee, (ii) thel date and location
of the contribution, and (iii) "A description of the property in
detail reasonably sufficient under the circumstances." Sec.
1.170A-13(b) (1), Income Tax Regs. The receipt need not contain
certain information (listed above) that is reguired by sec.
1.170A-13 (b) (2) (ii), Income Tax Regs. Because Van Dusen lacks a
donee receipt, we use the rules for non-moneylicontributions
without a receipt as the point of comparison.
"We recognize~ that the recordkeeping rules for money
contributions are also not well suited to unreimbursed volunteer
expenses. The rules for money contributions provide that records
showing the name of the donee are acceptable nubstitutes for
canceled checks.
Sec. 1.170A-13 (a) (1) (iii),
Income Tax Regs.
This reflects the assumption that records shouing the name of the
donee provide the same information as canceled checks. This
assumption is correct for money contributions|because a canceled
check reflects the name of the donee. But foE unreimbursed
volunteer expenses, a canceled check reflectsithe name of the
payee, not the donee. Thus a record of the name of the donee
would not reflect the same information as a canceled check. Van
Dusen's documents do not indicate the name of the donee.
We hold that the recordkeeping requirements of sec.
1.170A-13 (a), Income Tax Regs., govern unreimbursed volunteer
expenses of less than $250 in order to avoid the implausible
result that such expenses would be free from gecordkeeping
requirements. Of the two provisions that could govern
unreimbursed volunteer expenses of less than Š250, we believe
sec. 1.170A-13(a), Income Tax Regs., is more huitable for the
reasons stated in the text.
- 31 -
b.
Van Dusen's Documentation Meets the
Recordkeeping Requirements of Section
1.170A-13(a), Income Tax Regs.
Section 1.170A-13(a) (1),
Income Tax Regs., requires the
taxpayer to maintain one of the following:
(i)
A cancelled [sig] check.
(ii) A receipt from dhe donee charitable
organization showing the name of the donee, the date of
the contribution, and the amount of the contribution. A
letter or other communication from the donee charitable
organization acknowledging receipt of a contribution and
showing the date and amount of the contribution
constitutes a receipt * * * .
(iii) In the absence of a canceled check or
receipt from the donee cha itable organization, other
reliable written records showing the name of the donee,
the date of the contributiån, and the amount of the
contribution.
In determining whether Van Dusen has substantiated her payments
for veterinary services, pet supplies, cleaning supplies, and
utilities, we look to the following records that Van Dusen
introduced into evidence:
check copies," bank account
statements, credit card statements, a Thornhill Pet Hospital
client account history, a Cost o purchase history, Pacific Gas &
Electric invoices, a Waste Man gement payment history, and an
East Bay Municipal Utility District billing history."
We find
"See supra note 12 for an explanation of why we refer to
the documents as "check copies ' .
"We assume all of these documents have been properly
"[maintained]" within the meaning of sec. 1.170A-13(a) (1), Income
Tax Regs. The IRS does not ar ue that the "maintain" requirement
(continued...)
- 32 that Van Dusen's records are sufficient to substantiate all her
foster--cat expenses of less than $250.
Van Dusen' s documents are not canceled c ecks24 or receipts
from the donee charitable organization, Fix Oùr Ferals.
Nor are
her documents "other reliable written records , which are defined
by section 1.170A-13 (a) (1) (iii) ,
Income Tax R gs;, as records
that show "the name of the donee, the date of the contribution,
and the amount of the contribution."
Van Dusen's documents do
not show the name of the donee, which is Fix Our Ferals.
they show the names of the entities she paid.
Instead
Van Dusen' s
documents do not show the amounts of her cont ibutions to Fix Our
Ferals.
Instead they show the amounts of her cat-care expenses,
which invariably have a nondeductible compone it because some of
her cats were pet cats.
Thus Van Dusen's documents do not
strictly comply with section 1.170A-13(a) (1), Income Tax Regs.
Nonetheless, we find that Van Dusen has
complied with section 1.170A-13 (a) (1) ,
ubstantially
Income Tax Regs.
We
'lil
33 ( . . . continued)
means Van Dusen had to keep records continuously from the time
she incurred the expenses. Rather, the IRS contends that Van
Dusen's documents do not satisfy the substantiation requirements
regardless of how long they were kept .
34A canceled check is "A check bearing a notation that it
has been paid by the bank on which it was dra n. " Black' s Law
Dictionary 269 (9th ed. 2009) . Van Dusen' s check copies bear no
such notation and thus are not canceled checks. Rather, they are
photocopies of carbon copies of the original hecks. See supra
not e 12 .
- 33 -
analogize Van Dusen's situation to that of the taxpayer in Bond
v. Commissioner, 100 T.C. 32
(1993) .
In Bond, a taxpayer donated
two blimps to a charitable orgênization.
Id. at 33.
Section
1.170A-13(c) (2) (i), Income Tax Regs., required him to obtain a
document appraising the two blimps.
Id. at 38-39.
The
regulation required that the appraisal document contain specific
items of information.
Id.
separate written appraisal.
The taxpayer failed to obtain a
Il at 34.
However, the taxpayer
attached a Form 8283, Noncash Charitable Contributions, on which
an appraiser had recorded information about the value of the two
blimps.
Id.
Bond distinguished between a regulatory requirement relating
to "the substance or essence of the statute", .strict adherence to
which is mandatory, and a requirement that is merely "procedural
or directory", which may be sa isfied by substantial compliance.
Id. at 41.
Bond held that the reporting requirements of section
1.170A-13, Income Tax Regs., are directory and require only
substantial compliance.
Id.
The Court further held that because
substantially all of the information required in an appraisal
document was recorded on the Form 8283, the taxpayer had complied
with the regulatory requirement to obtain an appraisal document.
Id. at 42.
Returning to Van Dusen, the relevant regulatory requirement
is section 1.170A-13 (a) (1), Income Tax Regs., which allows a
'I
- 34 taxpayer to rely on canceled checks to record contributions of
money.
Under Bond, Van Dusen's documents are legitimate
substitutes for canceled checks.
Van Dusen p oduced records of
her expenses which contained all of the infor ation that would
have been on a canceled check.
Her records show the name of the
payee, the date of the payment,.and the amoung of the payment.
(A canceled check by a volunteer generally re lects the name of
the payee, but it does not reflect the name o
the charitable
organization to which the volunteer's servicey are rendered.
It
might be useful for the volunteer to keep records of the name of
the charitable organization, but it is not our role to impose
such a requirement in the absence of a specif c regulatory
requirement.)
Therefore, Van Dúsen has subst ntially complied
with section 1.170A-13 (a) (1),
Income Tax Regs
An objection might be raised that the substantial compliance
doctrine should not apply to van Dusen becausg section
1.170A-13 (a) (1), Income Tax Regs., specifies what records are
valid substitutes for canceled checks.
The r gulation states
that the taxpayer can maintain a canceled che k, a receipt from
the donee, or "In the absence of a canceled check or receipt from
the donee charitable organization, other reliable written records
|
showing the name of the donee, the date of the contribution, and
the amount of the contribution."
Id.
In specifying what
documents are valid substitutes for canceled ghecks, though, the
- 35 regulation was plainly not written with unreimbursed volunteer
expenses in mind.
It requires substitute records to reflect the
name of the donee, even though canceled checks for unreimbursed
volunteer expenses would reflect the name of the payee.
It
requires sub'stitute records to reflect the amount of the
contribution, even though canceled checks for unreimbursed
volunteer expenses often reflect a nondeductible component."
Van
Dusen's documents fail to qualify as "other reliable written
records" only bécause the regulation was not written with
unreimbursed volunteer expense
"As noted above,
sec.
in mind."
This failure should
1.1/0A-13 (f) (10),
Income Tax Regs.,
partially incorporates the requirements of sec. 1.170A-13 (a),
Income Tax Regs., for unreimbursed volunteer expenses of $250 or
more. See supra note 28. In what appears to be an attempt to
correct the inadequacies of se . 1.170A-13(a), Income Tax Regs.,
as a recordkeeping requirement for unreimbursed volunteer
expenses, sec. 1.170A-13 (f) (10), Income Tax Regs., specifies that
sec. 1.170A-13(a), Income Tax Regs., need be satisfied only to
the extent necessary "to substÅntiate the amount of the
expenditures".
(Emphasis addeE.)
""[0]ther reliable writte records" must, by definition,
also be "reliable". Their reliability is determined by the
circumstances, including whethbr the records were contemporaneous
and whether the records were regularly kept.
Sec.
1.170A-13 (a) (2) (i),
Income Tax Regs.
Furthermore,
the
information required by sec. 1.170A-13(a) (1) (iii), Income Tax
Regs. (the "other reliable wriEten records" provision), must be
stated on the taxpayer's return if required by the return form or
its instructions.
Sec.
1.170A-13(a) (2) (ii),
Income Tax Regs.
- Van Dusen's records satisfy the reliability requirement of
sec. 1.170A-13(a) (2) (i),
Incom
Tax Regs.
The documents were •
made contemporaneously and in the course of regular
recordkeeping. The check copias faithfully duplicate the
original checks, which Van Dusan wrote in 2004. Van Dusen's
credit card company, Van Dusen's bank, and Pacific Gas & Electric
(continued...)
- 36 -
not preclude the application of the substantial compliance
doctrine in Bond.
We conclude that Van Dusen has substanti ted all the
veterinary, pet supply, cleaning supply, and utility expenses of
Il
less than $250.
As discussed earlier, these pxpenses must be
adjusted to exclude amounts not attributable to foster-cat care.
After such adjustments are made, Van Dusen can deduct 90 percent
of her less-than-$250 veterinary and pet supp y expenses and 50
percent of her less-than-$250 cleaning supply and utility
expenses.
36
issued her statements in 2004 based on electrbnic compilations of
transactions at the time. Similarly, Thornhill Pet Hospital,
Costco, Waste Management, and East Bay Municipal Utility District
recorded Van Dusen's payments in their computer systems in 2004,
and later retrieved the data in response to her customer service
inquiries.
Van Dusen's tax return did not need to disclose any
information required by sec.
1.170A-13(a) (1) (iii),
Income Tax
Regs. Although Van Dusen submitted Form 8283, which requires the
name of the donee, the date of the contribution, and the amount
of the contribution--information required undpr sec.
1.170A-13(a) (1) (iii),
Income Tax Regs.--Van D sen did not need to
file this form. The instructions for Form 82 3 explicitly state
that it does not apply to out-of-pocket expen es incurred for
volunteer work.
(Although IRS form instructi ns are generally
not binding, see supra note 29, we cite the form instructions
here because sec. 1.170A-13 (a) (2) (ii),
Income Tax Regs., directs
the taxpayer to furnish the information requi ed by sec.
1.170A-13 (a) (1) (iii), Income Tax Regs., on th taxpayer's return
if required by the return form or its instructions.) On her tax
return, Van Dusen simply had to enter the total amount of her
monetary contributions (including out-of-pock t expenses)--which
she did.
Il
-
2.
37 -
Van Dusen Has N t Met the Substantiation
Requirements for Her Foster-Cat Expenses of $250
or More.
To claim a charitable-contribution deduction of $250 or
more, the taxpayer must substantiate the contribution with a
contemporaneous written acknow edgment from the donee
organizations
Tax Regs.
Sec. 170(f) (8) ( ); sec.
1.170A-13(f) (1), Income
A taxpayer who incu s unreimbursed expenses "incident
to the rendition of services" is treated as having obtained a
contemporaneous written acknowledgment if the taxpayer:
adequate records under * * *
[section 1.170A-13(a),
(1)
"Has
Income Tax
Regs.] to substantiate the amount "of the expenditures", and (2)
acquires a contemporaneous stalement from the donee organization
containing:
(A) A description of the services provided by the
taxpayer;
(B) A statement of whether or not the donee
organization provides any goods or services in
consideration, in whole or in part, for the unreimbursed
expenditures; and
(C) [A description and good faith estimate of the
value of any goods or services provided by the donee
organization].
Sec. 1.170A-13 (f) (10),
Income Tax Regs.
For the statement to be
contemporaneous, the taxpayer nust obtain the donee's statement
on or before the earlier of:
(1) the date the return was filed,
- 38 -
or (2) the due date (including extensions) fo
Sec. 1.170A-13 (f) (3),
filing the return.
Income Tax Regs.
Van Dusen has not satisfied the contemporaneous written
acknowledgment requirement.
The due date forffiling her 2004
return was April 15, 2005, and she filed her return on January
25, 2007.
The earlier of the two dates is April 15, 2005.
The
.I
date by which Van Dusen was required to obtain the donee's
|
statement is therefore April 15, 2005.
Van Dusen had not
obtained any written acknowledgment of her se vices from Fix Our
Ferals by April 15, 2005.
Even by trial, she had failed to
II
obtain from Fix Our Ferals a statement with the information
required by section 1.170A-13(f) (10), Income fax Regs."
Since Van Dusen lacks the appropriate wr tten acknowledgment
from Fix Our Ferals, she has not substantiate
any foster-cat expenses of $250 or more."
and cannot deduct
Neither party,
"The regulations do not specifically req ire the taxpayer
to attach the contemporaneous written acknowl dgment to the tax
return.
"Sec. 1.170A-13 (f) (10) (ii),
Income Tax Regs.,
specifies the
particular information required to be on the donee statement.
Van Dusen attempted to submit a letter writte by the Fix Our
Ferals treasurer in 2008 as proof of contempo aneous written
acknowledgment. See Ex. 3-P. At trial we su tained the IRS's
hearsay objection to the letter. Van Dusen filed a motion for
reconsideration of the evidentiary ruling. W6 denied the motion.
The letter does not qualify for any hearsay e ception. And
regardless, it fails to meet the requirements of sec.
1.170A-13 (f) (10) (ii),
Income Tax Regs.
"In Cohan v. Commissioner, 39 F.2d 540,
543-544
(2d Cir.
(continued...)
d 39
however, has identified which
-
ortions of the claimed deduction
are attributable to foster-cat expenses of $250 or more.
It
seems to us that the proper identification procedure is to
multiply each cat-care expense by the relevant percentage (90
percent or 50 percent) and see whether the resulting amount
equals or exceeds $250.
Any amount less than $250 is deductible,
and any amount that is $250 or more is not deductible.
By our
calculations, the following foster-cat expenses are $250 or more:
39(...cOntinued)
1930), the Court of Appeals for the Second Circuit held that if
the taxpayer has proven deductible expenses but the precise
amount remains uncertain, courds can estimate the amount of such
expenses. The Cohan rule does not allow Van Dusen to deduct any
foster-cat expenses of $250 or more. Sec. 170(f) (8) and sec.
1.170A-13(f), Income Tax Regs., impose specific substantiation
requirements on charitable contributions of $250 or more. The
Cohan rule does not relieve taxpayers of substantiation
requirements that Congress has specifically laid out. See Addis
v. Commissioner, 118 T.C. 528, 537 (2002) (denying charitable
deduction because taxpayer's contemporaneous written
acknowledgment did not comply with sec. 170(f) (8)), affd. 374
F.3d 881
(9th Cir. 2004); Stussy v. Commissioner, T.C. Memo.
2003-232 (disallowing deductioås for residential expenses for the
portions of a house used by chirity because taxpayer failed to
provide contemporaneous writte acknowledgment); see also Sanford
v. Commissioner,
50 T.C.
823,
827-828
(1968)
(Cohan rule
inapplicable when taxpayer has not satisfied sec. 274(d)
substantiation requirements), affd. per curiam 412 F.2d 201 (2d
Cir.
1969).
- 40 -
Amount
Constituting a
Pavee
Datel
Document
Thornhill
Pet
Hospital
1/17/04
Thornhill
Pet
Hospital
Amount I Listed
on Doeument
Foster-Cat
Expense
$1, 532 . 68
$1, 379 . 41
306.78
276.10
client
account
history
Thornhill
2/17/04
Pet
Hospital
Bank
statement2
Pet Vet Pet
Food
5/30/04
Credit card
statement
417.54
375.79
St. Louis
7/28/04
Credit card
477.00
429.30
Vet Clinic
statement
Pet Vet Pet
Food
9/21/04
Check no.
1428
6È7.81
619.03
St. Louis
Vet Clinic
10/16/04
Check no.
1442
3Ó9.00
278.10
Thornhill
11/06/04
Credit card
723.25
650.93
Pet
Hospital
statement2
il
Pet Vet Pet
Food
11/11/04
Check no.
1462
332.81
299.53
Berkeley Dog
and Cat
Hospital
11/15/04
Bank
statement
- 5Ò0.00
450.00
Thornhill
Pet
Hospital
11/30/04
Credit card
statement2
3$0.54
288.49
For credit card statements, dates refer to the transaction date, not the
posting date.
2Also reflected on the Thornhill Pet Hospital client account history.
Each of the remaining foster-cat expenses is less than $250.4°
4°On the basis of Van Dusen's credit card statement, we find
that the $292.15 payment to Bay Area Veterinary Specialist on
Nov. 29, 2004, was offset by a credit of $35.97 that was posted
on Nov. 30, 2004. Since Van Dusen's total payment to Bay Area
Veterinary Specialist was $256.18 ($292.15 - $35.97), the amount
of her foster-cat expense was $230.56 (90 percent of $256.18).
(continued. . . )
- 41 -
V.
Effect of Section 280A
Section 280A(a) provides that for individual taxpayers "no
deduction otherwise allowable under this chapter shall be allowed
with respect to the use of a d elling unit which is used by the
taxpayer during the taxable year as a residence."
section
280A(b) contains an exception to section 280A(a).
It provides:
"Subsection (a) shall not apply to any deduction allowable to the
taxpayer without regard to its connection with his trade or
business (or with his income-producing activity)."
The IRS
argues that section 280A forbids Van Dusen from claiming a
charitable-contribution deduction for a portion of her household
utility bills.
We hold that section 280A does not affect the
deductibility of Van Dusen's expenses.
Van Dusen's expenses
would be deductible without regard to any connection with a trade
or business.
See sec. 280A(b).
was legal services.
Van Dusen's trade or business
She worked as an attorney and derived all
her income from legal jobs.
She derived no income or expectation
of income from fostering cats.
Therefore, the utility bills are
covered by the exception in section 280A(b).
VI.
$100 Check to Island Cat
esources and Adoption
Van Dusen's documentation includes a $100 check to "ICRA"
(Island Cat Resources and Adopsion) with "fundraiser" in the memo
4°(...continued)
Therefore, we categorize this
xpense as less than $250.
- 42 line.
Island Cat Resources and Adoption is a section 170(c)
organization.
See supra note 17 and accompa ying text.
We hold
||
l'
that $100 is deductible as a charitable contribution to Island
Cat Resources and Adoption.
Van Dusen testified that the check
was a donation to the charitable organization, and her
documentation meets the recordkeeping requir ments of section
1.170A-13 (a),
Income Tax Regs.
To reflect the foregoing,
il
DecisioN will be entered
under Rule 155.
Il
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.