Deducting Charitable Gifts on Prior Year's Return

Deducting Charitable Gifts on Prior Year's Return Conrad Teitell

Gifts made by an individual after the close of a taxable year (e.g., 2014), but before the tax return due date (e.g., April 15, 2015) could at the donor’s election be treated as if made in that taxable year (e.g., 2014). The due date would be determined without taking extensions to file into account. The election could be made only at the time of filing the return.

Charitable Giving Act

Benefits. This second-chance-charitable-deduction provision under the Charitable Giving Extension Act, H.R. 3134, would give donors and would-be donors an opportunity to consider or reconsider making charitable gifts after their tax situation is better known.

Take these points into account if this bill is enacted: The usual substantiation, appraisal and delivery rules would apply. For example, for a gift of $250 or over, a donor is required to have a qualified receipt from the charity in hand before filing her return. Another example: If an appraisal is required, Form 8283 must be attached to the return. Yet other examples: Checks and securities are deemed delivered on the date of mailing (U.S. mail) to the charity. But the qualified contribution receipt (no goods or services—or you got X and you must reduce your deduction by X) must be in the donor’s possession before filing the return.

Tangible personal property is delivered when received by the charity and the charity has received a transfer-of-ownership document. For real property, the delivery date is the date that the charity receives the deed; if, however, recording is required under state law, the date of recording is the delivery date.

For life-income gifts made after the end of the taxable year and by the filing deadline: The documents must be signed; the property transferred; and substantiation and valuation documents and forms must be in the donor’s possession before filing the income tax return.

Take-away. Enactment of the Charitable Giving Extension Act would lead to larger and additional charitable gifts. But as just discussed, many gifts made after the end of the year would have to be made well before April 15 to be deductible on the prior year’s income tax return. My discussion of some wrinkles isn’t intended to rain on the parade, but to keep donors from falling into the drink.


The provision would be available only for individual taxpayers. Corporations already have a similar provision, Internal Revenue Code §170(a)(2). But a corporation must take steps before the end of its taxable year to deduct a gift on that year’s tax return for gifts made after the taxable year.

Here’s the story: A special rule, IRC §170(a)(2) allows corporations to elect to deduct gifts made this tax year on last tax year’s return when these conditions are met:

• The board of directors authorized the gift last tax year;

• The gift is paid within two and one half months of the beginning of this tax year, and

• The corporation is on the accrual method of tax reporting.

Treasury Regulation section 1.170A-11(b) imposes additional requirements:

• The election must be reported on the prior tax year’s return by claiming the contribution on that return.

• The corporation must attach to the filed return a written declaration that a resolution authorizing the contribution was adopted by the board of directors during the prior tax year.

• The declaration must be verified by an authorized officer under penalties of perjury.

• The corporation must attach to its filed return a copy of the board resolution authorizing the contribution.

The charitable donees needn’t be identified at the time the board resolution is adopted. All that is required is that the charitable contribution be authorized under the Code and regulations. Letter Ruling 7802001. Keep in mind, however, letter rulings can be relied on only by the recipients.

Passing a resolution at the end of each year can give a corporation some flexibility for the deduction year. If, for instance, there is an increase or decrease in tax rates, the corporation may be able to deduct a gift in the more advantageous year.

Even though a resolution has been passed, a gift can nevertheless be deducted on the following year’s tax return. How? The board votes not to file the election with the corporation’s tax return. Moreover, if filed, the election can be voided by filing an amended return before the return’s due date.

Conrad Teitell is a principal at Cummings & Lockwood in Stamford, Conn.