Get a prize, lose a deduction

Warm fuzzy feelings and a good tax deduction are no longer enough in charity fundraising. Charities go to great lengths to court donors, often offering much in return for the dollars contributed. These perks are exactly what Congress worried about when it created charitable contribution deductions and both legislators and the IRS have turned a suspicious eye on contributions that seem to garner as much booty for the donor as cash for the charity. Rutgers University professors Leonard Goodman and Jay A. Soled take a close look at the laws governing charitable contributions in the most recent issue of TAXES: The Tax Magazine. They note that many taxpayers either don’t know the rules or are willing to ignore them and “play the audit lottery” while taking large deductions that would be disallowed once the IRS found out about the gifts or services offered in return for their gifts. Fines and penalties can be assessed against the taxpayer, the return preparer, and the charity involved in many instances, Goodman and Soled note.

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This story is from the CCH’s monthly Focus on Tax newsletter, which provides advise and guidance on federal and state tax issues for tax and accounting professionals.

Read this article from CCH’s Journal of Taxation of Financial Products.


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