IRS Dispute Call Attention to Abuse of Donations for Clothing, Other Goods

When lawmakers last year passed tougher rules for donors who wanted to write off charitable gifts of clothes and household items, many nonprofit leaders worried that the stricter guidelines would curtail donations.

Dan Prives, a nonprofit-finance expert, says on his blog that when you consider the case of Christiana Stamoulis, it is easy to see why the IRS is paying more attention to such donations.

Ms. Stamoulis had claimed a charitable deduction for used clothes of $48,954 on a salary of $114,819 in 2002, according to The Washington Post. In 2003, she claimed $133,202 in donations on a salary of $192,535.

The court ultimately pegged her 2002 donation value at $8,949.

Mr. Prives, writing on Where Most Needed, says the case illustrates how some taxpayers hide behind charities to avoid paying their fair share.

“It shows the kind of abuse that is taking place with in-kind donations, and how the resulting loss in tax revenue greatly exceeds the benefit to charities,” Mr. Prives writes. “There are many more cases where the taxpayers exaggerate donation values but never get caught (possibly because they don’t make such egregious claims for deductions).”

In many cases, he says, charities simply go along with the ruse.

As it turns out, just as Mr. Prives was writing his posting, the federal government released a report showing that it lost up to $1.8-billion last year because taxpayers were potentially exaggerating the amount of their noncash gifts. (Read The Chronicle of Philanthropy report about the new study.)

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