How a “Gift Letter” (Contemporaneous Written Acknowledgment or CWA) Failed the Strict Substantiation Requirements in the Tax Code
May 15, 2026 – This week, the Tax Court held, in two related cases, that no tax deductions were available for charitable donations because the donors failed to meet one of the substantiation requirements associated with charitable giving. The cases are Martin v. Commissioner, T.C. Memo. 2026-39 (Stephen and Amanda Martin) and Martin v. Commissioner, T.C. Memo. 2026-40 (Clint and Jenifer Martin).
When a taxpayer seeks a charitable contribution deduction for donation of non-cash property (such as real estate) to a charity or government, the tax code imposes several requirements to substantiate the gift. One requirement (in section 170(f)(8)), for contributions valued at $250 or greater, is that the entity receiving the gift (the charity or the government) must provide the donor with a writing (called a “contemporaneous written acknowledgment,” often called a “gift letter” or “CWA”). The written acknowledgment must be received by the donor before the earlier of when the donor files the tax return for the year of the donation or the due date for filing the tax return for the year of the donation. For gifts of property other than cash, the written acknowledgment must describe the property; state whether the recipient provided goods or services for the property; and, if the recipient provided goods or services, describe and include a good faith estimate of the value of the goods or services. This CWA requirement was at issue in the Martin cases.
Clint and Stephen Martin, cousins, purchased property and donated it to a city. The IRS argued that the Martins did not obtain a CWA that explicitly stated that no goods or services were provided by the city in exchange for the gift. The court looked at four documents to evaluate whether the documents satisfied the CWA requirements. Because the CWA requirements are explicit statutory requirements, taxpayers must strictly comply.
First, the IRS argued that the documents failed to describe the contributed property because each cousin contributed a fractional interest in the real property, but the description was of the real property (the parcel number, acreage, and a description). The court held that the descriptions of the entire parcel satisfied the description requirement.
Next, the IRS argued that the city did not explicitly state that it did not provide consideration for the contribution. The court reviewed four documents. The first document, Form 8283, failed to contain a statement that the city provided no goods or services. The second document, the Joint Letter, characterized the land as a “donation” and a “gift,” but failed to explicitly state that the city provided no goods or services for the property, and it was silent as to what obligations (if any) the city would undertake to maintain the property. The court recognized that the statute requires “an affirmative statement” that the city provided no goods or services in exchange for the property; using the words “donation” and “gift” are not sufficient. The third document was the deed. The court noted that if a deed has an integration or merger clause stating that the deed constitutes the entire agreement between the parties and there is no indication that consideration was provided, then those two facts are deemed to satisfy the requirement that a CWA explicitly state that no goods and services have been provided. See IQ Holdings, Inc. v. Commissioner, T.C. Memo. 2024-104 at n.21. This exception did not apply to the Martins because both (1) the deed had no merger or integration clause, and (2) the deed specifically stated that the Martins received $10 and other good and valuable consideration. The fourth document was an agenda of the city council meeting where the city council discussed accepting the gift. The agenda stated that the city would incur no expenses in accepting the donation. The court disregarded the agenda because the agenda was before the gift had been accepted and because the language in the agenda contradicted the language in the deed that “other good and valuable consideration” had been provided.
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Tax deductions for charitable contributions have several legal requirements that, if not strictly complied with, can cause a lost deduction for actual donations. The complete disallowance of the charitable contribution deductions in these cases could have been avoided by consulting with a tax attorney experienced with charitable giving. If you are donating an asset and would like to consult with experienced tax attorneys who specialize in charitable giving, contact the attorneys at K. Tyson Law.
Written by Kim Tyson and Karin Gross.