Tax Byte
The High Cost of Documentation Failures for Non Cash Donations (William J. Cade v. Comm., TCM 2025-20)
William Cade claimed a $284,553 deduction for donated property on their amended 2019 return, which included clothing ($146,043), granite cobblestones ($89,100), and commercial vinyl tile with adhesive ($49,410). The IRS disallowed it entirely due to documentation failures.
The Three-Tiered Documentation Scheme
Section 170(f) establishes increasingly rigorous documentation requirements based on the value of donated property:
- Contributions of $250 or more require a contemporaneous written acknowledgment (CWA) from the donee organization
- Contributions exceeding $500 trigger additional verification requirements
- Contributions exceeding $5,000 necessitate a “qualified appraisal” by a “qualified appraiser”
The Contemporaneous Written Acknowledgment Requirement
A valid CWA must include a statement of whether the donee organization provided any goods or services in consideration for the gift. The acknowledgment is “contemporaneous” only if obtained on or before the earlier of:
- The date the taxpayer files the original return for the year of contribution
- The due date (including extensions) for filing the original return
The taxpayers in this case initially argued that their Forms 8283 served as valid CWAs—an argument the Tax Court flatly rejected since the forms contained no statement about goods or services provided in return for the donation.
Only after repeated requests from IRS Appeals did the taxpayers finally produce a receipt from the donee church, which raised suspicions due to its late production and inconsistencies with information on the Forms 8283 (including different addresses for the church and apparently different signatures, despite ostensibly being signed on the same day).
What Does IRS Accept as a Qualified Appraisal?
The IRC and Treasury regulations clearly define a “qualified appraisal” as one that includes specific information:
- The appraiser’s qualifications, including background, experience, education, and professional memberships
- The method of valuation used (income approach, market-data approach, replacement-cost-less-depreciation approach)
- The specific basis for the valuation (comparable sales transactions, statistical sampling)
The taxpayers argued that their Forms 8283 themselves constituted qualified appraisals—a non-starter since Form 8283 is explicitly an “appraisal summary,” not the appraisal itself. The Form 8283 declaration even references “qualifications as described in the appraisal,” making it clear that the two are separate documents.
The statements provided by the taxpayers’ appraisers months into the dispute (January 2023) couldn’t salvage the deduction because:
- They lacked critical information required in qualified appraisals (such as valuation method and specific basis)
- They were dated more than two years after the amended return was filed, violating the requirement that appraisals must be received before the return is filed
Who is a Qualified Appraiser?
The IRC defines a “qualified appraiser” as someone who:
- Has earned an appraisal designation from a recognized professional organization or met minimum education/experience requirements
- Regularly performs appraisals for compensation
- Meets other requirements prescribed by the Secretary
For contributions after January 1, 2019, Treasury Regulation §1.170A-17(b) requires that qualified appraisers have “verifiable education and experience in valuing the type of property” being appraised, demonstrated by either:
- Successful completion of professional or college-level coursework in valuing that type of property plus two years of experience, or
- A recognized appraiser designation for that type of property
None of the taxpayers’ appraisers met these standards. They had relevant industry experience (a retired Army store owner for clothing; a commercial stonework estimator for cobblestones; a flooring supervisor for vinyl tiles), but none demonstrated the required education credentials or professional designations, nor did they regularly perform appraisals for compensation.
Tax practitioner planning for large noncash donations
- Forms 8283 are not enough. The appraisal summary form cannot substitute for a contemporaneous written acknowledgment or a qualified appraisal.
- Timing matters. Both CWAs and appraisals must be obtained before filing the return claiming the deduction.
- Appraiser qualifications are rigorously defined. Industry experience alone is insufficient; education credentials or professional designations specific to the property type are required.
- Documentation must be comprehensive. Appraisals must include detailed information about valuation methods and specific bases for the determined values.
- Inconsistencies raise red flags. Discrepancies in documents (like different addresses for the same organization) will draw scrutiny.
This case serves as a critical reminder that even substantial charitable contributions will be disallowed entirely if documentation requirements aren’t meticulously followed, regardless of whether the donations actually occurred as claimed.