Court disallows charitable deduction carryovers for defective donor acknowledgment
William P. Wells v. Commissioner, T.C. Memo. No. 13104-24. 2026. Court Opinion.
A charitable contribution deduction can be denied even if the donation was made and the taxpayer obtained an appraisal, if the donee’s written acknowledgment does not state whether the donor received any goods or services in return.
Holding
The Tax Court denied William P. Wells and Ruth E. Wells’s charitable contribution carryover deductions for 2019, 2020, and 2021 because the written acknowledgment for their 2016 real property donation did not meet § 170(f)(8) requirements. However, the court did not apply the IRS’s § 6662 accuracy-related penalties because the taxpayers reasonably relied on their longtime CPA in good faith.
Why It Matters
This is a strict substantiation case. The Court did not question whether the property was donated. It disallowed the deductions because the acknowledgment omitted required language.
The ruling reinforces that Form 8283 and an appraisal do not cure a defective contemporaneous written acknowledgment.
The case matters for closely controlled charitable transactions. The taxpayer had roles on both sides of the transaction, but the Court still required a valid acknowledgment from the donee organization.
The penalty holding is taxpayer-favorable but limited. The taxpayers avoided penalties because they relied on a competent CPA, asked questions, and followed the advice they received.
Key Facts
Chamberlain, LLC owned real property in Claiborne County, Mississippi, consisting of 104 acres and 110,622 square feet of buildings. William Wells owned 50% of Chamberlain.
On December 30, 2016, Chamberlain transferred the property to Chamberlain-Hunt Academy by quitclaim deed. Chamberlain claimed a $4.42 million noncash charitable contribution deduction on its 2016 partnership return. A proportionate share flowed through to Wells.
The Wellses claimed a $2.21 million charitable contribution deduction on their 2016 joint return. They carried forward unused amounts and deducted $168,936 for 2019, $620,192 for 2020, and $374,561 for 2021.
The IRS issued a notice of deficiency disallowing the carryover deductions. It also determined § 6662 accuracy-related penalties of $9,091.60 for 2019, $44,873.60 for 2020, and $26,576.40 for 2021.
The taxpayers relied on four documents to satisfy the contemporaneous written acknowledgment requirement:
Donation letter.
Quitclaim deed.
Form 8283.
Acknowledgment letter from the donee.
The acknowledgment letter thanked the donors for their gift and stated that its value was $4.42 million. It did not describe the property. It also did not state whether Chamberlain-Hunt Academy provided goods or services in exchange for the contribution.
Statutory or Regulatory Framework
Section 170 allows a deduction for charitable contributions, but only if the taxpayer satisfies the substantiation rules. For contributions of $250 or more, § 170(f)(8) requires a contemporaneous written acknowledgment, meaning a written statement from the donee organization received by the taxpayer by the earlier of the return filing date or the return due date.
The acknowledgment must state:
The amount of cash and a description of any noncash property contributed.
Whether the donee provided goods or services in exchange.
A description and good-faith estimate of the value of any goods or services provided.
For noncash contributions above $5,000, § 170(f)(11) also requires additional substantiation, including a qualified appraisal.
Arguments
Taxpayers argued:
The donation letter, quitclaim deed, Form 8283, and acknowledgment letter should be read together.
The documents showed the claimed deduction equaled the claimed value of the donated property.
That equality showed no goods or services were provided in exchange.
The Court should take into account that Wells was involved with both the donor and the donee.
Government argued:
The documents did not include a valid acknowledgment from the donee.
The quitclaim deed was not signed or acknowledged by the donee.
The documents signed by the donee did not state whether goods or services were provided.
The deduction must be disallowed as a matter of law.
Court’s Reasoning
The Court accepted that multiple documents can collectively satisfy the contemporaneous written acknowledgment requirement.
The Court limited that rule to documents acknowledged by the donee organization.
The donation letter and quitclaim deed did not qualify because Wells created and signed them on behalf of the donor-side entity, not the donee.
The only documents acknowledged by the donee were the acknowledgment letter and Form 8283.
Form 8283 provided a property description but did not state whether the donee provided goods or services.
The acknowledgment letter thanked the donor and stated the property’s value, but it did not describe the property or address goods or services.
The Court rejected the taxpayers’ inference argument. Even if the surrounding facts suggested no consideration was provided, § 170(f)(8) requires the acknowledgment itself to say whether goods or services were provided.
Penalties
The IRS sought § 6662 accuracy-related penalties for substantial understatement and, alternatively, negligence or disregard of rules or regulations.
The Court rejected the penalties. The taxpayers showed reasonable cause and good faith because they retained a CPA, relied on him for the charitable contribution substantiation requirements, asked for clarification, obtained the records he requested, and followed the acknowledgment language he provided. The CPA had worked with Wells for about 30 years and had sufficient experience to justify reliance on the CPA.
Result
The Tax Court sustained the IRS’s disallowance of the charitable contribution carryover deductions for 2019, 2020, and 2021, but rejected the § 6662 penalties.
The Takeaway
Practitioners should treat the goods-or-services statement as required, not just implied. A large noncash charitable deduction can be denied even if the transfer happened, the appraisal was done, Form 8283 was filed, and the taxpayer acted in good faith.
List of Citations
§ 170(a)(1), allows charitable contribution deductions only when verified under Treasury regulations.
§ 170(f)(8), requires a contemporaneous written acknowledgment for contributions of $250 or more.
§ 170(f)(11), imposes additional substantiation rules for larger noncash contributions.
§ 6662 imposes accuracy-related penalties for negligence, disregard, or substantial understatement.
§ 6664(c) provides the reasonable cause and good faith defense to penalties.
Treas. Reg. § 1.170A-13(f), explains the written acknowledgment requirements.
Treas. Reg. § 1.6664-4, governs reasonable cause and good faith.
Irby v. Commissioner, 139 T.C. 371, supports using multiple documents to satisfy the acknowledgment requirement when the donee acknowledges them.