Timing Of Charitable Deductions

The charity received the funds on Dec. 31, and thus that is the date of the gift. The legitimate source of the money for the gift, whether from wages, borrowings, or gifts from another person, is irrelevant to the date of the completed gift. Thus, whatever date the debt related to a gift is paid (or even if it isn’t) is irrelevant to the timing of the completed gift, which is the date on which the charity receives the funds.

Although the gift has been given to the university, one of the restrictions requires that it be spent on an individual person. Limiting the gift to be spent by the charity on one particular person makes the gift non-deductible. It is permissible, however, to restrict the gift to benefit a particular type, class, or group of people such as football players or female, international graduate students. Further, the gift may be restricted to purchase a specific kind of asset without any damage to the deductibility of the gift (so long as the charity accepts the gift with the restriction).

A gift is complete when money is delivered to a charity or the charity’s agent. The post office is considered to be the agent of the charity. When it receives a properly addressed and stamped letter, then the charity’s agent has received it and the gift is complete.

A valid check is considered to be a valuable negotiable instrument even before it is converted into cash. As such when the charity or charity’s agent receives the check, the gift has been completed. In this case, the post office is considered to be the agent of the charity. When the post office receives a properly addressed and stamped letter containing a valid check, then the charity’s agent has received a valuable negotiable instrument and the gift is complete.

A gift with a retained interest is not deductible unless it falls into one of the specific statutory exceptions such as a charitable remainder trust, an undivided interest in all property interests owned by the donor, or a remainder interest in a home or farm. Thus, in this case the transfer generates no current tax deduction because of the donor’s retention of the rights to repurchase.

The gift is not completed until the donor releases his or her retained interest. This occurs when the option expires. At that point the gift is complete and the donor may deduct the value of the land

A promise to pay a gift is not a completed gift until money or property is actually received by the charity or the charity’s agent. It does not matter if the promise is legally enforceable, it is still a promise. The ability to sell the contractually guaranteed promise to a collection agency does not change the character of the contract as a promise which generates no completed gift unless and until the promise is actually fulfilled.

A post-dated check is the equivalent of a promise to pay money in the future (specifically on the check’s date). As such, it is treated like any other promise to pay money to the charity, meaning that there is no gift prior to the date on the check. However, at the point the check reaches its stated date, it becomes like any other valid check and is a valuable negotiable instrument at that point. Thus, on January 1, the valid check becomes a valuable negotiable instrument, and as the charity has already received the check, the gift is complete.

A C-corporation using accrual accounting can deduct a charitable gift made after the close of the tax year if they pass a resolution authorizing the giving during the tax year and then make the gift within two and one-half months of the close of the tax year. This means that the corporation must have a formal decision to make the gift before the end of the tax year, and they have a specific timeframe within which they must actually make the gift in order to qualify for the deduction.

When I click online to instruct the credit card company to make the donation, I am directing my agent (the credit card company) to make a gift. However, the gift is not completed until it is received by an agent OF THE CHARITY. Here the post office is treated as an agent of the charity, and thus the gift is completed on day 9.

An invalid check was never money or valuable property. Therefore at no time was money or valuable property given to the charity or the charity’s agent. As such, there was no deductible charitable gift.

The gift is completed when the donor delivers money or property to the charity or the charity’s agent. The time delay imposed by the charity’s agent is irrelevant as the gift is completed upon delivery to the charity’s agent. However, delivery to the donor’s agent does not make a completed gift, only delivery to the charity’s agent. Also, promises to give are not completed gifts until the delivery actually occurs. Gifts where the donor retains an interest in the property are generally not allowed, unless they fall into one of the exceptions such as an undivided share in all rights of the donor in the property or a gift of a remainder interest in a farm or home. A gift with a restriction that it must be used for one particular person is not deductible.

Volunteering time is not a deductible gift. (This makes sense, because the net result on income is similar to where a person was paid and then gives the pay to a charity.) Donations that are restricted to a particular individual are not deductible. However, money spent on reasonable expenditures while serving on behalf of the charity can be deducted.