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May 14, 2026: The Tax Court just handed down Martin v. Commissioner, T.C. Memo 2026-39 and every 501(c)(3) should take note. Spoiler: IRS wins because of one missing sentence and the taxpayer loses a giant deduction. Unfortunately, this isn’t overstating the situation.&nbsp;Brief Background: Taxpayer and his cousin donated land. Each had a 50% interest and claimed a $332,500 deduction. The IRS disallowed the entire deduction. Yikes.&nbsp;Court’s Reasoning: Section 170(f)(8) requires a contemporaneous written acknowledgment (“CWA”) for contributions of $250 or more.&nbsp;The CWA must affirmatively state whether the donee provided goods or services in exchange for the donated property.&nbsp;Strict compliance is required.&nbsp; Substantial compliance won’t cut it says the Tax Court.&nbsp;Calling it a "donation" or "gift" doesn't count.&nbsp;The document must say plainly the language required by Section 170(f)(8)(B)(ii), but if there was any consideration it must provide an estimate, as required by Section 170(f)(8)(B)(iii).&nbsp;Worse, the deed recited "$10 and other good and valuable consideration" and did not have a merger clause, which tanked one of their potential backup arguments.&nbsp; &nbsp;What makes this one particularly painful is the Martins did the hard part—they got the required appraisal for large noncash donations, they filed the Form 8283, included the donee signature, and even marshalled the city council agenda and other documents where the recipient acknowledged the donation. It was the easy part, missing one sentence required by Section 170(f)(8)(B)(ii), that sank the deduction.<h3>What To Do Now</h3><ul><li>Review your acknowledgment letters. Every CWA for donations of $250+ must affirmatively state whether you provided goods or services—even (especially) when the answer is "no." </li><li>Watch deed language. Coordinate with donor counsel to ensure boilerplate recitals of nominal consideration and the interaction with merger clauses don't cause a problem.&nbsp; &nbsp;</li><li>Mind the clock. A “contemporaneous” CWA means the taxpayer must obtain the CWA on or before the earlier of the date the taxpayer files the return claiming the charitable contribution deduction or the due date for the return. See 170(f)(8)(C). A late-filed amended form won't save it.&nbsp;</li></ul>

core/freeform

Andy Andrews

James R. Forrest

Jesse A. Roberts

Faith Based

Nonprofit

Lessons from the Tax Court: Contemporaneous Written Acknowledgments from Nonprofits to Donors – Strict Compliance Required, Substantial Compliance Not Enough.

Lessons from the Tax Court: Contemporaneous Written Acknowledgments from Nonprofits to Donors – Strict Compliance Required, Substantial Compliance Not Enough.

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