When you see kids playing competitive sports after school and on weekends they are likely coached and supervised by volunteers. They give not only their time (precious and in short supply), but often incur unreimbursed expenses.
The dollar amounts discussed in the “Small Tax” Court case that follows are small. But volunteers can learn valuable lessons — and earn deductions — from this case.
The taxpayer represented herself. Although not precedential, the court lays out the rules. So, let’s play ball.
What happened. Tawana Bradley volunteered as a cheerleading coach for a youth football and cheerleading league. She claimed charitable deductions for the following unreimbursed expenses: (1) charter bus rental; (2) pizzas, party favors and other supplies for a team party; and (3) use of her car when she traveled to and from team practices and games.
Bus rental. Tawana provided a charter confirmation form from the bus rental company showing a $660 charge for pickup and return of the bus. She paid for the rental with a $660 money order that she purchased with cash. She didn’t submit other documentation to support this claimed deduction.
Pizza, etc. Tawana provided several receipts that she testified represented unreimbursed expenses for a cheerleading team party during 2006. The receipts indicated that she made purchases of $30.16 for pizza, $2.07 for stickers, $31.78 for ribbons, $6.36 for office supplies and $91.90 for party supplies.
Auto expense. Tawana also claimed a deduction for unreimbursed mileage expenses for travel to and from team practices and games. She coached the cheerleading team (her ex-husband coached the football team). At trial, she produced a Mapquest driving directions printout that detailed the miles driven between her home and the field for the team's practices and games. The printout indicated that she and her ex-husband drove to and from the field four times a week for a period of 18 weeks and traveled 1,857.6 miles for team practices and games during 2006.
The charter bus rental deduction is disallowed. Charitable deductions are allowed for properly substantiated unreimbursed volunteer expenses. Generally, an unreimbursed volunteer expense can be substantiated by: (1) a canceled check, (2) a receipt from the donee organization, or (3) other reliable written records showing the name of the donee, the date of the contribution and the amount of the contribution. Van Dusen, 136 T.C. 515 (2011). However, for a contribution of $250 or more, a taxpayer must substantiate the contribution with a written acknowledgment from the donee organization. Internal Revenue Code Section 170(f)(8)(A).
A taxpayer who incurs unreimbursed expenses "incident to the rendition of services" is treated as having obtained a written acknowledgment if the taxpayer: “(1) ‘Has adequate records under *** [section 1.170A-13(a), Income Tax Regs.] to substantiate the amount of the expenditures’, and (2) acquires a contemporaneous statement from the donee organization containing: (A) A description of the services provided by the taxpayer; (B) a statement of whether the donee organization provides any goods or services in consideration, in whole or in part, for the unreimbursed expenditures; and (C) [a description and good faith estimate of the value of any goods or services provided by the donee organization]. Sec. 1.170A-13 (f)(10), Income Tax Regs.”
The Tax Court threw the volunteer under the deduction-denial bus. She did have a charter confirmation form and a money order receipt. However, because her contribution was greater than $250, she was required to substantiate it with a written acknowledgment from the donee organization. Tawana, the court ruled, failed to present any form of written acknowledgment from the donee organization.
The record doesn’t show whether Tawana had a slice of the pizza. But, the Tax Court allowed her to deduct the cost of the entire pie and the party supplies—a grand total of $162.27. In support, she provided receipts from the various vendors from whom she purchased the party supplies. The receipts bear Tawana’s handwritten notations of either "Cheerleader Donation" or "Office Supplies & Cheerleaders," and the items purchased were, the court noted, consistent with those one might purchase in preparation for a children's party.
Unreimbursed volunteer expenses of less than $250 are governed by section 1.170A-13(a), Income Tax Regs. Van Dusen v. Commissioner, *** That regulation provides that a contribution can be substantiated by (1) a canceled check, (2) a receipt from the donee organization, or (3) "other reliable written records" showing the name of the donee, the date of the contribution, and the amount of the contribution. Sec. 1.170A-13(a)(1), Income Tax Regs.
Tawana hadn’t provided a canceled check or a receipt from the donee organization regarding the pizza and party supplies. Thus, she was required to offer "other reliable written records" in order to substantiate her claimed deductions. Reg. Section 1.170A13(a)(1)(iii), defines "other reliable written records" as records that show "the name of the donee, the date of the contribution, and the amount of the contribution."
Strictly speaking, the court said, her documents didn’t meet the requirements of Section 1.170A-13(a)(1)(iii), because the receipts didn’t show the name of the donee organization. Instead, they show the names of the entities that she paid on behalf of the donee organization. However, Tawana’s documents are sufficient to substantially comply with Reg. Section 1.170A-13(a)(1). See Van Dusen v. Commissioner, supra. Section 1.170A-13(a)(1), allows a taxpayer to rely on canceled checks to record contributions of money made to a donee organization.
The court held that Tawana’s documents were legitimate substitutes for canceled checks, because they contained all of the pertinent information that would have appeared on a canceled check. The receipts showed the names of the payees, the dates of the payments and the amounts of the payments. Like Tawana’s records, a canceled check from a volunteer would generally reflect the name of the payee and not the name of the charitable organization to which the volunteer's services were rendered.
Mapquest to the rescue — automobile mileage. Tawana contended that she was entitled to deduct automobile mileage expenses incurred for her and her ex-husband's travel to and from team practices and games. In support, she produced a Mapquest directions printout. The printout detailed the number of miles that she and her ex-husband traveled over the course of a season while driving to and from team practices and games. The printout provides detailed information, including: (1) the distance for each trip taken; (2) the number of trips taken per week; and (3) the number of weeks during which the trips took place.
Back to the law. Reg. Section 1.170A-1(g) provides that a taxpayer may deduct unreimbursed expenditures made incident to the taxpayer's rendering services for a charity. The regulation further provides that out-of-pocket transportation expenses necessarily incurred while rendering services to the charity are also deductible. As stated earlier, a taxpayer's contribution can be substantiated by: (1) a canceled check, (2) a receipt from the donee organization, or (3) other reliable written records showing the name of the donee, the date of the contribution and the amount of the contribution.
But, the documentation Tawana provided wasn’t a canceled check or a receipt. Thus, for the printout to support her mileage expense deduction, it must qualify as "other reliable written records" under Section 1.170A13(a)(1).
Section 1.170A-13(a)(2) provides that the reliability of "other reliable written records" is determined on the basis of all of the facts and circumstances of a particular case. The court ruled: “On the basis of our consideration of all the facts and circumstances of this case, we find that the evidence [Tawana] supplied is sufficient to qualify as ‘other reliable written records’.”
“The standard mileage rate for computing the deduction for the use of a passenger automobile driven in connection with rendering services to a charitable organization is 14 cents per mile. . . . As a result, [Tawana] is entitled to a deduction of 14 cents per mile for the 1,857.6 miles she and her ex-husband traveled to and from team practices and games during 2006.”
Bradley, T.C. Summ. 2011-120 (No. 3564-210S)
Pointer. In addition to the standard 14 cents-per-mile rate, a volunteer may deduct unreimbursed parking and toll costs.
A volunteer has a choice. She can — instead of using the 14 cents-per-mile rule — deduct actual costs of gas and oil (tolls and parking too), provided she keeps proper records — for example, credit card receipts, canceled checks or travel diaries.
But: In no event, can a volunteer’s automobile insurance and depreciation be deducted.
For a doozy of a case — a virtual primer on deductibility of a volunteer’s expenses — see Van Dusen, 136 T.C. 515 (2011).
© Conrad Teitell 2012. This is not intended as legal, tax, financial or other advice. So, check with your adviser on how the rules apply to you.