In a case that provides an important lesson about the role of charitable deductions, The Ninth Circuit recently affirmed a tax court’s decision to sustain a deficiency against an estate because the estate had overstated its amount of charitable deductions. In the case, Ahmanson Foundation v. United States, the Ninth Circuit emphasized that a person who creates an estate is only allowed a deduction for estate tax purposes for what the charity actually received.
In addition to estate planning, taxpayers in the United States have relied on charitable donations for years to reduce their taxable income. The Tax Policy Center even reports that approximately 20 percent of people who file their taxes utilize charitable donations. Unfortunately, not every contribution that a person makes to a charity qualifies for tax deductions. As a result, this article reviews some of the various ways that a person can transfer assets to a charity and not qualify for a tax deduction.
# 1 – Contribution of Services