Kendrix v. Comm'r

T.C. Memo. 2006-9

UNITED STATES TAX COURT

BETTY KENDRIX, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 2303-04. Filed January 23, 2006.

R disallowed deductions claimed by P, for 2000 and
2001, on account of cash and noncash contributions to
certain churches and charitable organizations. R also
imposed accuracy-related penalties under sec. 6662(a),
I.R.C.

1. Held: Substantial portions of both cash and
noncash contributions claimed by P are disallowed for
failure to comply with the substantiation requirements
of sec. 170(f)(8), I.R.C., and sec. 1.170A-13(b)(2) and
(3), Income Tax Regs.

2. Held, further, R’s imposition of the sec.
6662(a), I.R.C., penalty is sustained.

Betty Kendrix, pro se.

Jonathan Sloat, for respondent.
 - 2 -

MEMORANDUM FINDINGS OF FACT AND OPINION

HALPERN, Judge: By notice of deficiency dated November 4,

2003 (the Notice), respondent determined deficiencies in

petitioner’s Federal income tax liabilities of $2,114 and $2,499

for her taxable (calendar) years 2000 and 2001 (the audit years),

respectively, and accuracy-related penalties of $422.80 and

$499.80 for 2000 and 2001, respectively. At the trial of this

case, petitioner conceded respondent’s denial, for lack of

substantiation, of her reported capital loss of $1,733 and

respondent’s application of the 10-percent additional tax under

section 72(t), in the sum of $849, on a premature distribution

from her individual retirement account. On brief, respondent

concedes a 2001 cash contribution by petitioner of $713. The

issues for decision are (1) whether petitioner is entitled to

certain charitable contribution deductions for the audit years

and (2) whether petitioner is liable for the accuracy-related

penalties determined by respondent under section 6662(a).

Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the audit years, and all

Rule references are to the Tax Court Rules of Practice and

Procedure. All dollar amounts have been rounded to the nearest

dollar.
 - 3 -

FINDINGS OF FACT

Some facts are stipulated and are so found. The stipulation

of facts, with accompanying exhibits, is incorporated herein by

this reference.

At the time the petition was filed, petitioner resided in

Los Angeles, California.

Petitioner’s Returns and Supporting Documentation

2000

Petitioner filed an Internal Revenue Service (IRS) Form

1040, U.S. Individual Income Tax Return, for 2000 (the 2000 filed

return). On line 15 of Schedule A, Itemized Deductions, to that

return she claimed a $12,000 charitable contribution deduction

for “[g]ifts by cash or check” (the cash contributions).

During respondent’s audit of petitioner’s 2000 and 2001

filed returns (the audit), petitioner submitted to the examining

agent an IRS Form 1040X, Amended U.S. Individual Income Tax

Return, for 2000 (the 2000 amended return), which stated that the

Schedule A contribution described in the 2000 filed return “was

incorrectly written as a cash contribution.” On line 16 of the

Schedule A attached to the 2000 amended return, petitioner

claimed a $12,000 charitable contribution deduction for gifts

“[o]ther than by cash or check” (the noncash contributions).
 - 4 -

Also attached to that return is an IRS Form 8283, Noncash

Charitable Contributions, which lists (1) three separate

contributions to Goodwill Industries of items described,

variously, as “clothing”, “housewares”, “audio equipment”, “var.

items”, and “misc items”, and (2) a contribution to “L.A. Family

Housing” of “appliances, furniture, TV, [and] misc. items”. Two

of the contributions to Goodwill Industries and the contribution

to L.A. Family Housing are each valued at $3,500 by “appraisal”,

and the other contribution to Goodwill Industries is valued at

$1,500 based upon “thrift shop value”. In each case, the date of

contribution is listed as “various”, and the method of

acquisition is stated to be by “purchase”.

Also, during the audit, petitioner submitted to the

examining agent a second IRS Form 8283 for 2000 (the 2000 amended

Form 8283), which lists the following noncash contributions for

2000: Three contributions to “Goodwill Los Angeles CA” or

“Goodwill” described as consisting of (1) “women clothing FMV est

$3413”, (2) “linens/houseware/books, videos misc., bicycles

$1570”, and (3) “audio & electrical items $590”; two

contributions to “L.A. Family Housing-L.A., CA” described as

consisting of (1) “furniture FMV $2118”, and (2) “furniture FMV

$2648”.

Attached to the 2000 amended Form 8283 are worksheets,

prepared by petitioner, one for each of the five above-mentioned
 - 5 -

contributions, which list each item included in the contribution

by cost and fair market value. The total dollar value of the

items listed on the worksheets ($10,339) matches the total dollar

value of the five contributions listed on the 2000 amended Form

8283.

Also attached to the 2000 amended Form 8283 are copies of

three receipts furnished by “Goodwill” (the Goodwill receipts),

two dated “01-07-00” and one dated “01-17-00”, all signed by the

same attendant, and a copy of a receipt from “L.A. Family

Housing” dated “9-8-00” (the L.A. Family Housing receipt), which

is unsigned. Each of the Goodwill receipts contains petitioner’s

name and address, and the form itself, under the heading “items

received”, lists certain types of items (e.g., clothing,

shoes/purses, housewares, etc.). On each receipt someone has

filled in the quantity donated, if any, in each category (e.g.,

clothing, five bags; shoes/purses, five boxes). The Goodwill

receipts do not list values, either per item or in total. The

L.A. Family Housing receipt also contains petitioner’s name and

address, and it has a line marked “Donation” on which someone has

filled in the items donated (e.g., “furniture, 2 beds set, TV,

VCR, dinner set”). There is also a line marked “Estimated Value”

on which someone has filled in “$5,000”. The L.A. Family Housing

receipt also states: “No goods or services were rendered to you

as a result of this donation.”
 - 6 -

In connection with this litigation, petitioner furnished a

receipt for taxable year 2000 cash contributions to “Gospel

Temple Baptist Church Partners Program” (the 2000 Gospel Temple

Baptist Church receipt), dated February 10, 2000,1 which lists a

total of $6,655 in contributions for 2000 and is signed by both

the church pastor and secretary. That contribution was not

listed on Schedule A to the 2000 amended return. The 2000 Gospel

Temple Baptist Church receipt breaks down the total contribution

into 12 monthly contributions ranging from $250 to $450. It also

lists specific payments for “Church Anniversary”, “Revival”,

“Annual Choir Concert”, “Pastor’s Appreciation”, and “Building

Fund” in amounts ranging from $125 (for “Annual Choir Concert”)

to $1,200 (for “Building Fund”).

2001

Petitioner filed an IRS Form 1040 for 2001 (the 2001 filed

return). On line 15 of Schedule A she claimed a $4,598 deduction

for cash contributions and, on line 16, a $4,000 deduction for

noncash contributions. The IRS Form 8283 attached to that return

lists a single noncash contribution to “Goodwill Ind. Los

Angeles, CA” of “clothing, furniture, misc items” valued at

1
As discussed infra, petitioner also furnished a receipt
for 2001 contributions to the same church dated Feb. 12, 2002.
We assume that the receipt for 2000 contributions was
inadvertently misdated, and that the writer meant to enter Feb.
10, 2001, as the date of execution of the receipt.
 - 7 -

$3,500 based upon “Thrift Shop Value”. The date of contribution

is listed as “various”, and the acquisition is stated to be by

“Purchase”.

During the audit, petitioner submitted to the examining

agent two IRS Form 1040X amended returns for 2001, only the first

of which contains a Schedule A and Form 8283, and neither of

which modifies the description of petitioner’s 2001 charitable

contributions as set forth on the Schedule A and Form 8283

attached to the 2001 filed return. Subsequently, petitioner

furnished another IRS Form 8283 for 2001 (the 2001 amended Form

8283) on which the only change from the two prior Forms 8283 is

the substitution of “Salvation Army Los Angeles, CA” for

“Goodwill Ind.” as the charitable donee. Attached to the 2001

amended Form 8283 is a worksheet prepared by petitioner similar

to the worksheets attached to the 2000 amended Form 8283.

Consistent with each of those worksheets, it lists each item

included in the contribution by alleged cost and fair market

value. The total dollar value of the items listed on the

worksheet ($3,3292) is less than both the $3,500 claimed on all

three of the Forms 8283 filed or submitted for 2001, and the

$4,000 deduction for noncash contributions claimed on the two

Schedules A filed or submitted for that year. Also attached to

2
The worksheet erroneously states that the total dollar
value of the listed items is $3,909.
 - 8 -

the 2001 amended Form 8283 is a copy of a receipt furnished by

the Salvation Army, dated May 17, 2001, and initialed “OV”, which

contains petitioner’s name and address, a preprinted list of

items “we need”, and a handwritten list of the items received,

consisting entirely of various items of men’s and women’s

clothing and accessories. The receipt does not list any values.

In connection with this litigation, petitioner furnished

receipts for 2001 cash contributions of $713 to West Angeles

Church of God in Christ (the 2001 West Angeles Church receipt)

and $5,500 to Gospel Temple Baptist Church Partners Program (the

2001 Gospel Temple Baptist Church receipt). The 2001 West

Angeles Church receipt, dated January 31, 2002, consists of a

form letter thanking all donors and an attachment detailing

petitioner’s 2001 contributions, which consisted of donations

throughout the year ranging from $1 to $132 in amount, and

certifying that “West Angeles Church provided no goods and

services in exchange for these contributions.” The 2001 Gospel

Temple Baptist Church receipt is identical in form to the 2000

receipt. Only the $200 contribution for “Revival”, the $100

contribution for “Annual Choir Concert”, and the April, June,

September, and December contributions of $200, $200, $225, and

$150, respectively, are less than $250. The $6,213 total cash

contribution claimed by petitioner on the basis of the 2001 West
 - 9 -

Angeles Church receipt and 2001 Gospel Temple Baptist Church

receipt is more than the $4,598 in cash contributions claimed on

the Schedules A attached to the 2001 filed and amended returns.

Petitioner’s Voluntary Bankruptcy Petition

On July 28, 1998, petitioner filed a voluntary petition for

relief under chapter 7 of the Bankruptcy Code with the U.S.

Bankruptcy Court for the Central District of California (the

bankruptcy petition). The bankruptcy petition lists total assets

of $4,100 and total liabilities of $118,847 for petitioner. The

bankruptcy petition also lists petitioner’s monthly charitable

contributions as zero.

Petitioner’s 1998 and 1999 Charitable Contribution Deductions

On Schedule A attached to both her 1998 and 1999 Federal

income tax returns, petitioner claimed $15,000 in cash

contributions.

Petitioner’s Employment by the IRS

Petitioner was employed by the IRS for more than 30 years.

She was employed by the IRS’s Criminal Investigation Division

from 1971 through 1982 and as a revenue officer from 1982 through

2004.

OPINION

I. Burden of Proof

Generally, petitioner bears the burden of proof. See Rule

142(a)(1). Section 7491(a) may shift the burden to the
 - 10 -

Commissioner in certain circumstances, but petitioner does not

contend, nor has she shown, that she satisfies the prerequisites

for the application of section 7491(a). In fact, as discussed

infra, petitioner has failed to substantiate adequately many of

the charitable contribution deductions at issue. Therefore, she

has failed to satisfy the prerequisite of section 7491(a)(2)(A)

“to substantiate any item.” Moreover, respondent introduced

uncontradicted testimony by the examining agent that petitioner

refused his request for bank statements and “did not feel she had

to answer any question.” As a result, she has also violated the

prerequisite of section 7491(a)(2)(B) to cooperate “with

reasonable requests for * * * information [and] documents”.

Petitioner bears the burden of proof.

Under section 7491(c), respondent retains the burden of

production (but not the overall burden of proof) with respect to

petitioner’s liability for the accuracy-related penalties

determined by respondent under section 6662(a). See Higbee v.

Commissioner, 116 T.C. 438, 446-447 (2001).

II. Code and Regulations

A. Code

In pertinent part, section 170(a)(1) provides that a

taxpayer may deduct “any charitable contribution * * * payment of

which is made within the taxable year”, and “[a] charitable

contribution shall be allowable as a deduction only if verified
 - 11 -

under regulations prescribed by the Secretary.” Pursuant to

section 170(c), a “charitable contribution” is “a contribution or

gift to or for the use of” an organization described in that

subsection.

In pertinent part, section 170(f)(8)(A) disallows a

deduction, under section 170(a), “for any contribution of $250 or

more unless * * * [substantiated] by a contemporaneous written

acknowledgment of the contribution by the donee organization that

meets the requirements of subparagraph (B).” Under section

170(f)(8)(B), the acknowledgment must state the amount of cash

and describe (but not value) any property other than cash

contributed, state “whether the donee organization provided any

goods and services in consideration, in whole or in part” for the

contribution, and provide “[a] description and good faith

estimate of the value of any goods and services” provided by the

donee organization “or, if such goods or services consist solely

of intangible religious benefits, a statement to that effect.”

The term “intangible religious benefit” is defined to mean “any

intangible religious benefit which is provided by an organization

organized exclusively for religious purposes and which generally

is not sold in a commercial transaction outside the donative

context.” Sec. 170(f)(8)(B)(iii).
 - 12 -

B. Regulations

Pursuant to section 1.170A-13(a)(1), Income Tax Regs., cash

contributions must be substantiated by either a canceled check, a

receipt from the donee showing the donee’s name and the date and

amount of the contribution, or “other reliable written records”

showing the donee’s name and the date and amount of the

contribution. Section 1.170A-13(a)(2), Income Tax Regs.,

provides rules governing the reliability of records.

Pursuant to section 1.170A-13(b)(1), Income Tax Regs.,

noncash contributions must be substantiated, at a minimum, by a

receipt from the donee organization showing the name of the

donee, the date and location of the contribution, and a

“description of the property in detail reasonably sufficient

under the circumstances.” Where it is “impractical” to obtain a

receipt, taxpayers must maintain “reliable written records” of

their noncash contributions. See id. Section 1.170A-13(b)(2),

Income Tax Regs., provides rules governing the reliability and

content of such records, and paragraph (b)(3) provides

information retention and reporting requirements for claimed

noncash contributions in excess of $500, which incorporate the

rules of paragraph (b)(2)(ii) regarding the content of records.

Pursuant to section 1.170A-13(f)(1), Income Tax Regs.,

“[s]eparate contributions of less than $250 are not subject to *

* * section 170(f)(8), regardless of whether the sum of the
 - 13 -

contributions made by the taxpayer to a donee organization during

a taxable year equals $250 or more.”

III. Discussion

A. Cash Contributions

1. 2000

On brief, petitioner claims a deduction for “documented”

2000 cash contributions of $4,762. In support of that claim,

petitioner relies on the 2000 Gospel Temple Baptist Church

receipt and a letter, dated December 13, 2004, from West Angeles

Church of God in Christ, attached to her opening brief (the West

Angeles Church of God letter), stating that petitioner

contributed $732 to that church in 2000.3

Because the West Angeles Church of God letter was neither

shared with respondent before trial, introduced in evidence at

trial, or brought to the Court’s attention before the record was

closed, it is not admissible evidence. Attachments to briefs are

not evidence and may not be considered. Rule 143(b); Kwong v.

Commissioner, 65 T.C. 959, 967 n.11 (1976); Perkins v.

3
With respect to the 2000 Gospel Temple Baptist Church
receipt, petitioner concedes, on brief, that the amounts
(totaling $2,300) attributed to “Church Anniversary”, “Pastor’s
Appreciation”, and “Building Fund”, which constitute the proceeds
of fundraisers or benefits organized by petitioner that she
donated to the church, do not constitute deductible
contributions. That leaves total listed contributions of $4,355
($6,655 less $2,300). That amount plus the alleged $732
contribution to West Angeles Church of God in Christ totals
$5,087, which exceeds the $4,762 that petitioner claims is
supported by the documentary evidence of 2000 cash contributions.
 - 14 -

Commissioner, 40 T.C. 330, 340 (1963). Even though petitioner is

a pro se taxpayer, application of that rule in this case is

appropriate. The Court, during the trial, specifically advised

petitioner: “You can’t add any facts in the brief”, and “Any

facts that you want me to consider, you have to tell me right now

on the record.” Cf. Clifton-Bligh v. Commissioner, T.C. Memo.

2003-44. Moreover, by failing to state whether West Angeles

Church of God in Christ provided any goods or services in

consideration, in whole or in part, for what, on its face,

appears to be a contribution in excess of $250,4 the letter fails

to satisfy the substantiation requirements of section 170(f)(8).

See sec. 170(f)(8)(B)(ii).

We are satisfied that the 2000 Gospel Temple Baptist Church

receipt constitutes a “receipt” for the contributions listed

therein. See sec. 1.170A-13(a)(1)(ii), Income Tax Regs. It

fails to state, however, whether the church provided any goods or

services in consideration, in whole or in part, for those

contributions. Because the contribution for “Revival” and each

of the 12 monthly contributions are stated to be contributions of

$250 or more, all of those contributions fail to meet the

requirements of section 170(f)(8)(B)(ii). Therefore, they are

4
The West Angeles Church of God letter contains no
breakdown, by amount, of the $732 in total contributions for
2000. Therefore, it does not support a finding that all or any
portion of that contribution was in increments of less than $250.
 - 15 -

nondeductible. See Castleton v. Commissioner, T.C. Memo. 2005-58

(deduction for contribution of property to allegedly tax-exempt

religious organization alternatively denied for failure of the

organization to issue a receipt satisfying the requirements of

section 170(f)(8)(B)(ii)); see also Roark v. Commissioner, T.C.

Memo. 2004-271. Only the $125 contribution for “Annual Choir

Concert” is not subject to section 170(f)(8). Respondent does

not otherwise challenge the 2000 or 2001 Gospel Temple Baptist

Church receipts as evidencing petitioner’s payment of the amounts

listed therein or the status of that church as an organization

described in section 170(c). Therefore, we hold that, for 2000,

petitioner is entitled to deduct $125 on account of cash

contributed to Gospel Temple Baptist Church for “Annual Choir

Concert”.

2. 2001

On brief, petitioner claims to have provided documentation

sufficient to support a deduction for 2001 cash contributions of

$4,133 consisting of $713 in donations to West Angeles Church of

God in Christ and $3,400 in donations to Gospel Temple Baptist

Church.

Respondent concedes that the 2001 West Angeles Church

receipt “satisfies the requirements of [section 170(a)]”.

Accordingly, respondent concedes petitioner’s entitlement to a

$713 deduction for 2001 cash contributions to that church.
 - 16 -

The 2001 Gospel Temple Baptist Church receipt, like the 2000

receipt, fails to state whether the church provided any goods or

services in consideration, in whole or in part, for the

contributions listed therein. Therefore, all of the listed

contributions of $250 or more are nondeductible pursuant to

section 170(f)(8)(B)(ii). Only the $200 “Revival” contribution,

the $100 “Annual Choir Concert” contribution, and the respective

April, June, September, and December contributions of $200, $200,

$225, and $150 (a total of $1,075) are not subject to section

170(f)(8) and are, therefore, deductible.5

B. Noncash Contributions

On brief, petitioner claims to have “documented” noncash

contribution deductions of $9,979 for 2000 and $3,329 for 2001,

although the total dollar value of the items listed on the

worksheets attached to the 2000 amended Form 8283 is $10,339, not

$9,979. She claims that her “documented contributions be allowed

for 2000 and 2001.”

In support of her valuations of the donated items, which

consist of used clothing and accessories, housewares, linens,

books, furniture, audio/video equipment, and home appliances,

petitioner attached to her opening brief a printed sheet of

5
Consistent with her position for 2000, petitioner
concedes, on brief, that the amounts attributed to “Church
Anniversary”, “Pastor’s Appreciation”, and “Building Fund”,
totaling $2,100, are nondeductible.
 - 17 -

unspecified origin which purports to list “suggested price

ranges” developed “with the help of Salvation Army and Goodwill”

for those types of items. Petitioner argues that her valuations

are within the suggested ranges. As stated supra, attachments to

briefs are not evidence and may not be considered.

Respondent argues that petitioner is not entitled to any

deduction for her alleged noncash contributions because her

contribution claims lack credibility and because they do not

satisfy the substantiation requirements of the Code and

regulations.

Petitioner testified that all of the donated items either

were purchased from the son of a deceased girlfriend who needed

the money ($3,000) to buy drugs, or were purchased (or picked up)

“off the street” and refurbished by her. Petitioner also cites

distributions from her thrift plan as a source of funds used to

purchase the donated items, although she also testified that she

needed and used those funds for living expenses.

Respondent finds petitioner’s testimony to be “implausible

and uncorroborated,” and he concludes, on the basis of the

evidence, that “petitioner lacked the property that she claims to

have contributed.” Respondent lists several reasons for his

skepticism. He notes the discrepancy between petitioner’s 1998

return, in which she reported cash charitable contributions of

$15,000, and her representations in her bankruptcy petition,
 - 18 -

under penalty of perjury, that (as of July 27, 1998) she owned

$4,100 in total assets and that her current (monthly) expenses

did not include any charitable contributions. Respondent also

points to a deposition taken of petitioner (on January 6, 1999),

in connection with the bankruptcy proceeding, in which she states

that one of her creditors had seized all of her property. In

addition, respondent argues that “[p]etitioner’s numerous

inconsistent [reporting] positions further undermine her

credibility.”

Petitioner has failed to corroborate her testimony regarding

the manner in which she acquired the allegedly donated items.

Nor has she offered any proof in support of her claims regarding

the costs (together with dates of acquisition) of those items as

reflected in her worksheets, which, if supported, might give some

indication of the values of those items. Nonetheless, the

receipts from Goodwill Industries, L.A. Family Housing, and the

Salvation Army are evidence that those organizations did, in

fact, receive some amount of used clothing, appliances,

furniture, etc., from petitioner. Respondent does not challenge

the authenticity of those receipts, nor does he question the

status of those organizations as organizations described in

section 170(c), and we find that petitioner delivered the items

listed in those receipts to those organizations.
 - 19 -

Although the preprinted receipts may be authentic, the

receipts furnished by Goodwill Industries and the Salvation Army

fail to state whether those organizations provided any goods or

services in consideration, in whole or in part, for the items

listed therein. Because petitioner claims that the total value

of the items listed on each of those receipts is at least (indeed

exceeds) $250, those contributions (for 2000 and 2001) are

nondeductible pursuant to section 170(f)(8)(B)(ii).6 That leaves

for our consideration only the L.A. Family Housing receipt for

2000, which does state that “no goods or services were rendered

to you as a result of this donation” and is, therefore, compliant

6
Internal Revenue Service Publication 526, Charitable
Contributions (Rev. Dec. 2000), explains how a taxpayer claims a
deduction for a charitable contribution. The publication makes
clear that the various record-keeping requirements for noncash
contributions depend on the amount of the deduction claimed for
the noncash contribution, not on the actual value of the property
contributed. Id. at 13. That rule, focusing on the amount of
the claimed deduction rather than the value of the property
contributed, is supported by the legislative history of sec.
13172 of the Omnibus Budget Reconciliation Act of 1993, Pub. L.
103-66, 107 Stat. 445, which added para. (8) to sec. 170(f). See
H. Rept. 103-111, at 563 (1993), 1993-3 C.B. 167, 441 (describing
House bill provisions requiring substantiation for charitable
contributions and stating that the responsibility is on taxpayer
claiming an itemized deduction of $750 or more (reduced to $250
in Senate amendment) to request substantiation from the charity
of the contribution), id. at 565, 1993-3 C.B. 443 (describing the
Senate amendment to the same effect), id. at 567, 1993-3 C.B. 445
(describing the conference agreement as following the Senate
amendment). Thus, sec. 170(f)(8) applies to petitioner’s noncash
contributions by virtue of her claim that each of those
contributions was at least $250. It is of no consequence that
the actual value of the items of the property on each receipt may
have been less than $250.
 - 20 -

with section 170(f)(8)(B)(ii). However, that receipt, for a

claimed deduction of $4,766, does not contain “[a] description of

the [donated] property in detail reasonably sufficient under the

circumstances”, as required by section 1.170A-13(b)(1)(iii),

Income Tax Regs. See also Castleton v. Commissioner, T.C. Memo.

2005-58. Although it sets forth a list of items (e.g.,

furniture, beds, TV, VCR, dinner set, stove, “old” recorder) and

a total “estimated value” of $5,000, the L.A. Family Housing

receipt contains almost no information regarding the quality,

age, or condition of the donated items that would enable us to

ascertain their value at the time of the donation. Therefore,

there is no evidence that the $5,000 estimated value is accurate

or that it was furnished by the donee rather than by petitioner.7

We also find that petitioner’s worksheets listing the items

allegedly donated to L.A. Family Housing Counsel fail to comply

with the requirement of section 1.170A-13(b)(2)(ii)(D), Income

Tax Regs., regarding the content of a taxpayer’s written records,

that such records state “the method utilized in determining the

fair market value” of the donated property. The only semblance

of a valuation methodology is petitioner’s practice of valuing

each item at less than the alleged cost of that item. But

7
Petitioner’s valuation of the items allegedly donated to
L.A. Family Housing, as set forth in her worksheets attached to
the 2000 amended Form 8283 ($4,766) is close enough to $5,000 to
suggest that that figure was furnished by petitioner rather than
L.A. Family Housing.
 - 21 -

petitioner has furnished no evidence (such as canceled checks or

bank withdrawals contemporaneous with the property acquisition

dates) that would support her cost figures.8 Moreover, because

petitioner’s worksheets were attached to an amended Form 8283

that was furnished to respondent on December 23, 2002, in

connection with the audit, we infer that they were not prepared

contemporaneously with the contributions in 2000, a fact which

casts doubt upon the reliability of those worksheets. See sec.

1.170A-13(a)(2)(i)(A), Income Tax Regs. Under these

circumstances, we find that petitioner’s worksheets are

inadequate to substantiate her claimed deduction for noncash

contributions to L.A. Family Housing in 2000.

Nonetheless, as noted, supra, we are satisfied that

petitioner did donate property to L.A. Family Housing, which

raises the issue as to whether we may use our discretion under

the Cohan rule to find some amount of allowable deduction for the

property donated to L.A. Family Housing. See Cohan v.

Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930), under which we

may estimate the amount of a deductible expense, bearing heavily

against the taxpayer whose inexactitude is of his or her own

8
Even if we were to admit into evidence the printed list
of “suggested price ranges” developed “with the help of Salvation
Army and Goodwill” attached to petitioner’s opening brief (see
discussion, supra), the correlation between the items on that
list and the items on petitioner’s worksheets is unclear.
Moreover, as a list of “suggested” price ranges, that list is not
evidence of the actual value of any particular item.
 - 22 -

making. The issue is whether Cohan is applicable in the face of

the statutory admonition of section 170(a)(1) that “[a]

charitable contribution shall be allowable as a deduction only if

verified under regulations prescribed by the Secretary.” Here,

petitioner has not complied with the verification requirements of

section 1.170A-13(b), Income Tax Regs., nor has there been even

substantial compliance with those regulations. (See Bond v.

Commissioner, 100 T.C. 32, 41 (1993), in which we held that the

reporting requirements of the regulations under section 170 are

“directory and not mandatory”, and that substantial (as opposed

to literal) compliance with those regulations is sufficient to

sustain a claimed charitable contribution deduction.) On a

number of occasions, this Court has utilized the Cohan rule to

permit deductions for a portion of claimed charitable

contributions that have not been adequately substantiated. See,

e.g., Fontanilla v. Commissioner, T.C. Memo. 1999-156; Drake v.

Commissioner, T.C. Memo. 1997-487; Cavalaris v. Commissioner,

T.C. Memo. 1996-308; Bernardeau v. Commissioner, T.C. Memo. 1981-

584; Olken v. Commissioner, T.C. Memo. 1981-176. In none of

those cases did we squarely address the potential conflict

between section 170(a)(1) and our application of Cohan to

unverified or inadequately substantiated charitable

contributions. Nor is it necessary to do so in this case,

because the deduction we would be inclined to allow by applying
 - 23 -

the Cohan rule ($300) would result in total itemized deductions

for 2000 that are less than the standard deduction applicable to

a head of household that respondent has allowed to petitioner in

computing her deficiency for that year. Therefore, because of

our disallowances with respect to petitioner’s claimed deductions

for cash and (other) noncash contributions for 2000, the issue of

whether we may allow her a deduction, under the Cohan rule, for

noncash contributions to L.A. Family Housing is moot.

C. Section 6662(a) Penalty

Section 6662(a) imposes a penalty equal to 20 percent of the

underpayment in tax attributable to, among other things,

negligence or disregard of rules or regulations (without

distinction, negligence). See sec. 6662(b)(1). The penalty for

negligence will not apply to an underpayment of tax to the extent

the taxpayer can show both reasonable cause and that the taxpayer

acted in good faith. See sec. 6664(c)(1). Negligence “includes

any failure by the taxpayer * * * to substantiate items

properly.” Sec. 1.6662-3(b)(1), Income Tax Regs.

All of the charitable contributions deductions that we have

disallowed herein are attributable to a lack of adequate

substantiation, including the deductions disallowed because the

acknowledgments obtained by petitioner from donees were in

violation of section 170(f)(8). Petitioner’s failure to obtain

acknowledgments stating that the donee did not provide goods or
 - 24 -

services in consideration, in whole or in part, for all but one

of her cash and noncash contributions in excess of $250

constituted a failure to comply with what is specifically

described by the Internal Revenue Code as a “[s]ubstantiation

requirement”. See sec. 170(f)(8). Petitioner, a long-time IRS

employee and self-professed frequent contributor to charitable

organizations, should have been aware that all but one of the

donee acknowledgments failed to satisfy the special

substantiation requirement of section 170(f)(8)(B)(ii), and she

should have asked the issuing donee organizations to satisfy that

requirement before deducting her contribution to those

organizations in excess of $250. Not only is the requirement to

obtain a proper acknowledgment set forth in the Code and in the

regulations (see sec. 1.170A-13(f)(2)(i)), it is also contained

in both the instructions for preparing Schedule A (see, e.g.,

2000 Instructions for Schedule A, Itemized Deductions, p. A-4)

and IRS Publication 526, Charitable Contributions, 13 (Rev.

December 2000).

By demonstrating petitioner’s failure to substantiate the

charitable contributions disallowed herein, respondent has met

his burden of production, under section 7491(c), with respect to

his determination of penalties under section 6662(a). Because

petitioner has failed to meet her burden of proving that she

acted with reasonable cause and good faith, we sustain
 - 25 -

respondent’s determination that petitioner is liable for the

accuracy-related penalty on her underpayments for the audit years

associated with the charitable contribution deductions disallowed

herein. See Higbee v. Commissioner, 116 T.C. at 449. We also

sustain respondent’s imposition of that penalty on petitioner’s

underpayment associated with the conceded adjustments for 2001

(respondent’s denial of petitioner’s reported capital loss of

$1,733 for lack of substantiation and respondent’s application of

the 10-percent additional tax, in the sum of $849, on a premature

distribution from petitioner’s individual retirement account).9

IV. Conclusion

As noted supra note 9, we sustain the full amount of

respondent’s tax deficiency and penalty determinations.

Decision will be entered

for respondent.

9
Our disallowance of petitioner’s deductions for
charitable contributions (although less than respondent’s) still
has the effect of requiring the identical recomputation of
petitioner’s tax liability for both 2000 and 2001, whereby
respondent applied the standard deduction applicable to a head of
household. Consequently, we sustain the full amount of
respondent’s tax deficiency and penalty determinations for the
audit years.