Form 8283, Noncash Charitable Contributions, must be filed with an individual’s income tax return to substantiate noncash charitable contributions made during a given tax year. The instructions to Form 8283 indicate that the form must be filed with the individual’s tax return for the year the individual contributes the property and first claims a deduction for the contribution. 1 A literal reading of this instruction suggests that both requirements must be met before Form 8283 is required to be filed.
What if the individual claims the standard deduction in the year of the contribution (year 1) because the standard deduction is larger than the allowable deduction for the charitable contribution? Arguably the individual did not claim the deduction in that year and thus is not required to file Form 8283 in that year.
What if the individual claims the standard deduction but the charitable contribution was larger than the applicable percentage limitations for charitable contributions (i.e., the contribution would have been limited if the taxpayer had itemized deductions)? Per Regs. Sec. 1.170A-10(a)(2), the carryover provisions apply to contributions in excess of the limitations even though the taxpayer takes the standard deduction instead of itemizing.
Example: A married couple, both 66 years of age, file a joint tax return for 2011 when their adjusted gross income (AGI) is $18,000. During 2011, the couple gave $6,000 cash contributions to their church and also contributed a 30% capital gain property with a fair market value of $8,000 to the church. They did not have any other deductions.
It is more advantageous for the couple to elect the standard deduction than to itemize deductions as shown in the exhibit. Since it is more advantageous for the couple to choose the standard deduction, they must also calculate their charitable contribution carryover. Under Sec. 170 and the associated regulations, individual charitable contributions of non–capital gain property are limited to 50% of AGI. Any contributions in excess of the AGI limitation can be carried forward and deducted in subsequent years. Contributions of capital gain property are limited to the lesser of 30% of AGI or the amount remaining under the 50% limitation after subtracting non–capital gain contributions.
In the example above, the $6,000 cash contribution is below the AGI limit of $9,000 (50% of the couple’s $18,000 AGI) and hence is factored into the carryover calculation despite the taxpayers’ election to use the standard deduction. Consequently, the limit for 2011 for the capital gain charitable contribution is the difference between the 50% limitation and the cash contribution ($3,000), as the latter is less than 30% of AGI ($5,400). Since the capital gain property is valued at $8,000, this creates a charitable contribution carryover of $5,000 ($8,000 – $3,000).
If the couple itemized deductions in 2011, they would have been able to claim $9,000 in charitable contributions ($3,000 of which is the 30% capital gain property), assuming they completed and attached the required Form 8283, Section B, to their tax return (to substantiate the 30% capital gain property contribution).
However, as shown in the exhibit, electing the standard deduction is more advantageous for this couple in 2011. After choosing to take the standard deduction, the couple has a $5,000 charitable contribution carryover.
What if the couple also claims the standard deduction in year 2, 2012? As in year 1, 2011, they are not required to file Form 8283 because they did not claim the deduction in that year.
What if this couple used the standard deduction in the first four carryover years following the year of the charitable contribution (years 2012–2015) and did not file Form 8283 in any of those years because they did not claim the deduction? If there is an unused contribution carryover for the fifth carryover year—2015—can it be used in the fifth year, assuming the couple itemizes deductions in that year?
It could be argued that Form 8283 is not required to be filed in the fifth carry-over year since that year was not the year of the contribution. But, by the fifth carryover year, the tax year in which the original contribution was made, 2011, would be closed by the normal three-year statute of limitation, and the IRS would not have been given information about the contribution.
The instructions for Form 8283 on page 1 say: “File Form 8283 with your tax return for the year you contribute the property and first claim a deduction.” On page 7, the instructions say: “Your deduction generally will be disallowed if you fail to: Attach a required Form 8283 to your return.” Given a literal reading of the form’s instructions, it would probably be best to file Form 8283 in the year of the contribution when this year is a standard deduction year, even though the form is not required for that year.
The IRS should revise the instructions for Form 8283 to more clearly explain when it is required to be filed, given that the instructions state that failure to file the form can cause the deduction to be disallowed in its entirety.
Michael Schaefer is a practicing CPA in Denver, CO. Elizabeth Conner is a senior instructor in accounting at the University of Colorado–Denver, in Denver, CO. Douglas Laufer is a professor of accounting at Metropolitan State College of Denver, in Denver, CO. Gregory Clifton is an assistant professor of accounting at Metropolitan State College of Denver, in Denver, CO. For more information about this article, please contact Ms. Conner at Elizabeth.Conner@ucdenver.edu.