Giving away donation receipts

[David Sq]

Hi,
As background, I placed a 5 years worth of charitable contributions into the fidelity charitable fund in 2017. We don’t have a mortgage, and thus don’t itemize given the larger standard deduction.

We in addition do small charitable things such as donating a 20 dollars worth bag of clean used clothes, a $100 ticket to a charity event, that sort of things. These now aren’t deductible. What are your thoughts on my giving the receipt for these things to a friend or family member that can itemize them? I wouldn’t be getting anything in return. Is there anything ethically or morally wrong with it?

Thanks

[UncleBen]

IMO, yes it is wrong. The donations do not belong to the family member.

[student]

I don't think this can be legally done. At first, I thought may be you could have donated on behalf of someone else but I think that is not allowed also. https://www.accountantforums.com/thread ... on.140766/ https://finance.zacks.com/gets-tax-cred ... 10028.html

[stan1]

Over the years I have taken many gifts people have given me to a thrift shop with no moral or ethical quandary. Fortunately I've been able to talk most of them out of it in recent years but that's a different topic. You could just give someone the bag of clothes and say "maybe you or someone you know can use this, or just donate it to charity".

[JoeRetire]

We in addition do small charitable things such as donating a 20 dollars worth bag of clean used clothes, a $100 ticket to a charity event, that sort of things. These now aren’t deductible. What are your thoughts on my giving the receipt for these things to a friend or family member that can itemize them? I wouldn’t be getting anything in return. Is there anything ethically or morally wrong with it?

Of course it's wrong. These friends and family didn't make the donations and thus are not entitled to the tax benefits.

If you give these items to your family and friends and they in turn donate them, then they would be entitled to the receipts and tax writeoffs.

[Gill]

Other than being tax fraud, go ahead. The person taking the deduction is filing a fraudulent return.
Gill

[drg02b]

If you gave items to others to donate, then that would probably be fine. But no nonprofit in their right mind is going to acknowledge a monetary donation as coming from someone else when it came from you.

[Jack FFR1846]

Although you stressed "morally wrong", let's not forget it's also "legally wrong".
Gill

Although I'm not a lawyer, I was accepted to law school (and decided not to go) and have watched every episode of "the Paper Chase".

So my question: In the case mentioned where one family gives a bag of donation clothes to another, if that family then donates this bag, collects their own receipt and uses this as a deduction, is this ok legally? I'm wondering because the bag of clothes did not cost them anything to begin with and it was donated to them.

I know from a practical sense that the IRS is not going to chase down someone for $25 in claimed donations. Just wondering from a legal perspective if there's a clear cut answer.

[White Coat Investor]

We in addition do small charitable things such as donating a 20 dollars worth bag of clean used clothes, a $100 ticket to a charity event, that sort of things. These now aren’t deductible. What are your thoughts on my giving the receipt for these things to a friend or family member that can itemize them? I wouldn’t be getting anything in return. Is there anything ethically or morally wrong with it?

Of course it's wrong. These friends and family didn't make the donations and thus are not entitled to the tax benefits.

If you give these items to your family and friends and they in turn donate them, then they would be entitled to the receipts and tax writeoffs.

Easy to get around this legal/moral dilemma. First gift the item/money, then have them donate it. End result is the same.

[Rupert]

Although you stressed "morally wrong", let's not forget it's also "legally wrong".
Gill

Although I'm not a lawyer, I was accepted to law school (and decided not to go) and have watched every episode of "the Paper Chase".

So my question: In the case mentioned where one family gives a bag of donation clothes to another, if that family then donates this bag, collects their own receipt and uses this as a deduction, is this ok legally? I'm wondering because the bag of clothes did not cost them anything to begin with and it was donated to them.

I know from a practical sense that the IRS is not going to chase down someone for $25 in claimed donations. Just wondering from a legal perspective if there's a clear cut answer.

The difference, both legally and morally, is that the person you give the bag of donation clothes to doesn't have to donate them. You've gifted the bag to them, and they can do what they like with your gift. Regardless whether they bought the clothes in the bag, the clothes now belong to them.

[goingup]

What are your thoughts on my giving the receipt for these things to a friend or family member that can itemize them?

We don't itemize any longer either. Dropped off donations last week. Declined the receipt. My advice is just decline the receipt and move on.

[Gill]

The difference, both legally and morally, is that the person you give the bag of donation clothes to doesn't have to donate them. You've gifted the bag to them, and they can do what they like with your gift. Regardless whether they bought the clothes in the bag, the clothes now belong to them.

Correct. What is wrong is making a gift to charity and then giving away the receipt so someone else can commit tax fraud.
Gill

[jimb_fromATL]

Hi,
As background, I placed a 5 years worth of charitable contributions into the fidelity charitable fund in 2017. We don’t have a mortgage, and thus don’t itemize given the larger standard deduction.

We in addition do small charitable things such as donating a 20 dollars worth bag of clean used clothes, a $100 ticket to a charity event, that sort of things. These now aren’t deductible. What are your thoughts on my giving the receipt for these things to a friend or family member that can itemize them? I wouldn’t be getting anything in return. Is there anything ethically or morally wrong with it?

Thanks

I don't think this can be legally done. At first, I thought may be you could have donated on behalf of someone else but I think that is not allowed also. https://www.accountantforums.com/thread ... on.140766/ https://finance.zacks.com/gets-tax-cred ... 10028.html

It is ethically and morally wrong, because the friends or family members did not make the contributions. It is also legally wrong, because it would be tax fraud for them to claim that they did.

Here are some excerpts from Publication 526 about charitable contributions.

• "...This publication explains how to claim a deduction for your charitable contributions.
  
  … You can deduct your contributions only if you make them to a qualified organization.
  Example 1. You contribute cash.
  
  You make a voluntary contribution to the social security trust fund,
  
  …Generally, you can deduct contributions of money or property you make to, or for the use of, a qualified organization. A contribution is “for the use of” a qualified organization when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement. The contributions must be made to a qualified organization and not set aside for use by a specific person. If you give property to a qualified organization, you generally can deduct the fair market value of the property at the time of the contribution. See Contributions of Property, later…"

Nowhere that I could find does it say that you can deduct donations made by somebody else.

I doubt that the IRS is very likely to audit their claims unless it's a huge amount of money. If the amount were large enough to get the attention of the IRS, they'd require proof via receipts, but those would be in your name, not theirs. Even if they caught it, the IRS would most likely just disallow the deduction, not prosecute somebody for tax fraud for claiming a deduction for a donation they didn't make.

Remember that a couple needs $24K of other deductions before they save any taxes for charitable contributions. Only about one in every three or four taxpayers exceeded the standard deduction to get any tax savings before the limit was doubled. So even fewer people will be able to itemize now. Then the savings is only the tax amount on the value of the donated items.

So … by the time someone has enough income to even have $24K in other deductions, it doesn't seem like the small extra savings would be worth lying about it on their tax return. Aside for the moral, ethical, and legal issues, it seems to me that the potential egg-on-the-face feeling of getting caught lying over something so trivial would not make it worth it.

jimb

[GoldStar]

I suppose its not illegal for you to give them to someone but it is certainly illegal for them to file a false tax returning which is what you are suggesting they will do with your receipts.

[student]

Hi,
As background, I placed a 5 years worth of charitable contributions into the fidelity charitable fund in 2017. We don’t have a mortgage, and thus don’t itemize given the larger standard deduction.

We in addition do small charitable things such as donating a 20 dollars worth bag of clean used clothes, a $100 ticket to a charity event, that sort of things. These now aren’t deductible. What are your thoughts on my giving the receipt for these things to a friend or family member that can itemize them? I wouldn’t be getting anything in return. Is there anything ethically or morally wrong with it?

Thanks

I don't think this can be legally done. At first, I thought may be you could have donated on behalf of someone else but I think that is not allowed also. https://www.accountantforums.com/thread ... on.140766/ https://finance.zacks.com/gets-tax-cred ... 10028.html

It is ethically and morally wrong, because the friends or family members did not make the contributions. It is also legally wrong, because it would be tax fraud for them to claim that they did.

Here are some excerpts from Publication 526 about charitable contributions.

• "...This publication explains how to claim a deduction for your charitable contributions.
  
  … You can deduct your contributions only if you make them to a qualified organization.
  Example 1. You contribute cash.
  
  You make a voluntary contribution to the social security trust fund,
  
  …Generally, you can deduct contributions of money or property you make to, or for the use of, a qualified organization. A contribution is “for the use of” a qualified organization when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement. The contributions must be made to a qualified organization and not set aside for use by a specific person. If you give property to a qualified organization, you generally can deduct the fair market value of the property at the time of the contribution. See Contributions of Property, later…"

Nowhere that I could find does it say that you can deduct donations made by somebody else.

I doubt that the IRS is very likely to audit their claims unless it's a huge amount of money. If the amount were large enough to get the attention of the IRS, they'd require proof via receipts, but those would be in your name, not theirs. Even if they caught it, the IRS would most likely just disallow the deduction, not prosecute somebody for tax fraud for claiming a deduction for a donation they didn't make.

Remember that a couple needs $24K of other deductions before they save any taxes for charitable contributions. Only about one in every three or four taxpayers exceeded the standard deduction to get any tax savings before the limit was doubled. So even fewer people will be able to itemize now. Then the savings is only the tax amount on the value of the donated items.

So … by the time someone has enough income to even have $24K in other deductions, it doesn't seem like the small extra savings would be worth lying about it on their tax return. Aside for the moral, ethical, and legal issues, it seems to me that the potential egg-on-the-face feeling of getting caught lying over something so trivial would not make it worth it.

jimb

I don't know why you are quoting me. I said I think it cannot be legally done and I gave the appropriate links. I am not sure whether you are agreeing or disagreeing with me by quoting me. Based on what you wrote, it seems that you are agreeing with me.

[Earl Lemongrab]

So my question: In the case mentioned where one family gives a bag of donation clothes to another, if that family then donates this bag, collects their own receipt and uses this as a deduction, is this ok legally? I'm wondering because the bag of clothes did not cost them anything to begin with and it was donated to them.

Sure. Just because something was a gift doesn't mean it has no value. By donating, you give any value the item has. That's what your deduction is based on.

[Gill]

Just to add another twist, if A gives an item to B on condition that B donate it to charity C you have a step transaction and the IRS will treat it as if A made the donation.
Gill

[47Percent]

Just to add another twist, if A gives an item to B on condition that B donate it to charity C you have a step transaction and the IRS will treat it as if A made the donation.
Gill

A twist to your twist:

The step transaction doctrine is applied in practice only if it is beneficial to the IRS (i.e. without it, the tax assessment would have been lower).

So, in the above example, IRS will deny the deduction to B.

That doesn't mean A can claim it (with someone else's name on the receipt). That too will be denied!

[GerryL]

I used to write software reviews and got to keep the software. If I wasn't going to use the software after I had submitted the review, I would sometimes drop it off at Goodwill. I was talking to someone about how much I might claim as a deduction for a pricey (at that time) software package and he asked me if I claimed the value of the product as income. I don't know if he was speaking with any expertise, but he was suggesting that it would not be a legitimate deduction if I did not count the value of the item as income -- and that it might come back to bite me.

[Gill]

Just to add another twist, if A gives an item to B on condition that B donate it to charity C you have a step transaction and the IRS will treat it as if A made the donation.
Gill

A twist to your twist:

The step transaction doctrine is applied in practice only if it is beneficial to the IRS (i.e. without it, the tax assessment would have been lower).

So, in the above example, IRS will deny the deduction to B.

That doesn't mean A can claim it (with someone else's name on the receipt). That too will be denied!

Of course. In my hypothetical I was assuming the receipt had no designated donor, much as I received a few days ago from Goodwill.
Gill

[jebmke]

I used to write software reviews and got to keep the software. If I wasn't going to use the software after I had submitted the review, I would sometimes drop it off at Goodwill. I was talking to someone about how much I might claim as a deduction for a pricey (at that time) software package and he asked me if I claimed the value of the product as income. I don't know if he was speaking with any expertise, but he was suggesting that it would not be a legitimate deduction if I did not count the value of the item as income -- and that it might come back to bite me.

If you didn't pay for the software then I do not think you are allowed to deduct it. Your basis is zero in the donated items.

[47Percent]

The fact remains that most of these laws, regulations, statutes -- however well written -- have some grey area. Not in all cases. But, more often than one would think. Just the sheer number of tax, contract, regulation lawsuits represented on both sides by highly qualified lawyers is proof enough that some judge/jury is needed to interpret the language.

In addition, these kind of "interpretations" also vary from what is officially said and what actually happens.

The most recent Realtime episode of Maher gives an example of the chasm between what is said in someone's facebook profile and postings vs. what their browser history reveals.

So, undoubtedly there is some of that too.

[LadyGeek]

Discussions of dishonest behavior or bypassing the law are totally unacceptable.

The approach is to educate members on how to do things legally. That being said, the question has been answered.

I removed an off-topic post suggesting tax evasion (you won't get caught). This thread has run its course and is locked.