Donating land to a city seems like a straightforward charitable act. You find a piece of property, decide to give it away, get an appraisal, file the paperwork, and claim the deduction. For many taxpayers, the assumption is that as long as the donation actually happened and the value is reasonable, the deduction should stand.
That assumption can be dead wrong. The tax code imposes strict documentation requirements on charitable contributions over $250. One of those requirements is a contemporaneous written acknowledgment from the donee organization. And “strict” means strict. The court has held that the doctrine of substantial compliance does not apply. If the acknowledgment letter is missing a required statement, the entire deduction is disallowed. Not reduced. Eliminated.
In Martin v. Commissioner, T.C. Memo. 2026-40, the U.S. Tax Court addressed what happens when a taxpayer donates property worth hundreds of thousands of dollars but the acknowledgment documents fail to include one specific statement. The case provides an opportunity to consider just how demanding the contemporaneous written acknowledgment rules really are — and why even a well-intentioned donor can lose everything at the documentation stage.
Facts & Procedural History
Martin and his cousin jointly owned about 13 acres of land in Utah. They bought the property in 2014 for about $22,000 using funds from a limited liability company they co-owned. The taxpayer later executed a warranty deed transferring the property into both of their names.
In late 2018, the taxpayer and his cousin decided to donate the property to Highland City. They sent the mayor and City Council a letter offering the donation. The City Council voted to accept. On December 21, 2018, both donors and the mayor signed a joint letter stating that the property was being offered as “a donation of land” for a “conservation contribution” and that the city would “maintain the property in perpetuity as preserved open space.” The donors agreed to pay all associated costs and keep the taxes current.
A few days later, the taxpayer and his cousin signed a warranty deed conveying the property to Highland City. The deed stated that the property was conveyed “for and in consideration of the sum of Ten and no/100 Dollars ($10.00), and other good and valuable consideration.”
An appraiser valued the property at $665,000. On his 2018 return, the taxpayer claimed a charitable contribution deduction of about $339,000 for his 50% interest. He attached the appraisal and a Form 8283, Noncash Charitable Contributions, to the return.
The IRS examined the return and issued a notice of deficiency disallowing the entire deduction and it proposed an accuracy-related penalty of about $16,500 for a substantial understatement of income tax. The taxpayer petitioned the U.S. Tax Court to contest the determination.
What Is a Contemporaneous Written Acknowledgment?
Section 170(f)(8)(A) of the tax code says that no deduction is allowed for a charitable contribution of $250 or more unless the taxpayer has a contemporaneous written acknowledgment — a CWA — from the donee organization. This is not a new requirement. It has been in the code for decades. The courts have had little difficulty denying charitable deductions when the letter is not produced by the taxpayer.
Not any letter will suffice. The contemporaneous written acknowledgement or “CWA” must have three things. First, a description of the property contributed. Not a valuation. Just a description. Second, a statement of whether the donee organization provided any goods or services in exchange for the contribution. And third, if the donee did provide something in return, a good faith estimate of its value.
Most taxpayers focus on the first requirement. They make sure the donation letter describes what was given. That is the easy part. The problem is the second requirement. The CWA must affirmatively state whether the donee gave anything back. And this statement is required even if the donee gave nothing at all. The acknowledgment has to say so explicitly.
This is where we get into the Martin case. The donors had a letter. They had a deed. They had an appraisal. But the documents they relied on as their CWA did not include an affirmative statement that Highland City provided no goods or services in exchange for the property. A technical footfault. The question for the court was whether this technical footfault was fatal to the charitable deduction or not.
Does the Word “Donation” Satisfy the Requirement?
The court first considered whether the word “donation” in the CWA suffices. This is worth pausing on. The joint letter in this case referred to the property transfer as a “donation” and a “gift.” Many taxpayers would read this language and assume it covers the requirement. If you call it a gift, doesn’t that mean no consideration was exchanged?
The U.S. Tax Court has said, no. In prior cases, the court has found that the word “donation” is consistent with a gratuitous transfer that is nonetheless reciprocated to some extent by the donee. Put differently, just because you call something a gift does not mean the donee gave nothing in return. A city might provide a tax incentive, a zoning variance, or some other benefit as part of the deal. The word “donation” does not rule that out.
The same logic applied to the phrase “generous gift” in another case the court cited. It was not enough. The statute requires an explicit, affirmative statement about whether goods or services were provided. Using gift language is not a substitute.
In the present case, the joint letter described what the donors contributed. It said the property was a donation for conservation purposes. But it was silent on what Highland City did or did not provide in return. It did not say “Highland City provided no goods or services in consideration for this contribution.” But the taxpayer had other arguments too.
Can a Deed Fill the Gap?
The taxpayer also pointed to the warranty deed as part of the CWA. The tax code does not require the CWA to be a single document. The court has allowed a “series of documents” to satisfy the requirement. So the question was whether the deed, combined with the letter and the Form 8283, together contained the missing statement.
The deed did not help. It stated that Highland City provided “$10 and other good and valuable consideration” for the property. That language is standard boilerplate in real estate deeds. But in the context of a charitable donation, it works against the taxpayer. The deed affirmatively says that consideration was exchanged. That is the opposite of what the CWA needs to say.
The court has recognized a narrow exception. In cases where a deed contains a “merger clause” — a provision stating that the deed represents the entire agreement between the parties — the court has treated that clause as an affirmative indication that no consideration was provided outside the deed. The theory is that a merger clause forecloses the possibility of any side deals or hidden exchanges.
The 2018 deed in this case did not contain a merger clause. The taxpayer argued that under Utah law, the joint letter and the deed together should be treated as a complete agreement with the operative effect of a merger clause. The court was not persuaded. There are no cases extending the narrow merger-clause exception to look outside a deed for additional documents that might supply the same function. And doing so would contradict a statute that, by its express terms, requires a written acknowledgment. You cannot read something into a deed that the deed does not say. According to the court, the absence of this and the silence in the letter was fatal.
Why Substantial Compliance Does Not Work Here
Many areas of tax law allow for substantial compliance. If you mostly got it right, the court will give you credit. The CWA rules are different. The court has held explicitly that the doctrine of substantial compliance does not apply to the failure to obtain a CWA meeting the statutory requirements.
The reason is built into the design of the statute. The CWA exists so the IRS can evaluate a charitable contribution deduction based on a document that the donee — not the taxpayer — provides. If taxpayers could substantially comply by cobbling together various documents that sort of say what the statute requires, the entire purpose of the rule would be undermined. The IRS would have to guess at the meaning of incomplete statements rather than relying on a clear, affirmative acknowledgment.
This is a harsh result. The Martins actually donated the property. Highland City actually received it. The appraiser valued it at $665,000. None of that was in dispute. But the deduction was disallowed in full because the acknowledgment documents did not contain one required statement. But all may not be lost, there are often alternatives. Taxpayers may have to get creative. For example, the taxpayers might be able to convince the City to unwind the transaction and do it again in a later year.
The Takeaway
The charitable contribution rules are among the most demanding substantiation requirements in the tax code. This case is a reminder that even a genuine, well-documented donation can be denied entirely if the donee’s acknowledgment letter is missing a single element. The requirement is not that the donation be legitimate. The requirement is that the paperwork say exactly what the statute demands. For any contribution over $250, the donee’s acknowledgment must affirmatively state whether goods or services were provided in return. If nothing was provided, the letter must say so in clear terms. Words like “donation” or “gift” are not enough according to this court case. Taxpyaers should review their acknowledgment letters before filing and make sure every required statement is there.
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