State Tax Court Denies Deduction

Published 2025-11-06

GiftLaw Note: In Copeland v. Dept. of Revenue, TC-MD 240623R, the Oregon Tax Court disallowed the taxpayer’s noncash charitable contributions due to a lack of substantiation as required by Internal Revenue Code Sec. 170. The taxpayer was permitted two cash donations that were substantiated during the proceedings.
 
Hannah Copeland, an individual taxpayer in Oregon, claimed charitable contributions in the amount of $14,529 on her 2020 individual income tax return. Copeland represented herself in the proceedings. On the 2020 return, the donations reached $159 in cash and $14,100 in noncash contributions. During the proceedings, Copeland produced two checks substantiating $170 of cash charitable contributions.
 
Copeland offered evidence of the noncash contributions by contemporaneous donation receipts and a personal notebook with recordings of the donation details. Copeland donated the following aggregate valued category or items: $4,425 of clothing, $3,192 of household items, $4,983 of furniture and $1,500 of collectibles. The aggregate values were not challenged. Over 30 items were donated and item purchase dates were as late as 2009.
 
Contemporaneous written acknowledgements were provided for all but one donation from the nonprofits that received the items. The one donation where the receipt included the date and purchase price, the taxpayer failed to provide a contemporaneous written acknowledgement (CWA) from the nonprofit.
 
The personal notebook created a schedule of donation dates, corresponding values for each of the four categories of items donated. Descriptions of the property for each donation date were listed as well. 
 
The fair market value provided by Copeland was determined by replacement cost without regard for the condition of the item donated. Replacement cost was researched through Facebook Marketplace listings for comparable items. The comparable items were not the same items as those donated and no linking to the donated items was provided for explanation of how the values were determined.
 
Original receipts were also included, but various issues were present, such as illegibility, missing purchase dates, and/or item descriptions not being descriptive of particular items. Other substantiation was provided from screenshots of Amazon shipping notifications, but the screenshots were not linked to particular donations.
 
Oregon follows federal tax provisions generally and including for substantiation of charitable donations. The taxpayer has the burden of proof when claiming deductions and must prove the right to claim itemized deductions. The Court found that Copeland was unable to prove a right to claim the deductions. Further, the valuation method was inappropriate for charitable contributions.
 
Under Treasury Reg. 1.170A-16(c)(3)(iv)(D), a taxpayer who claims a deduction for charitable contributions of more than $500 must establish the fair market value of the noncash property. Fair market value is defined as “the price at which the property would change hands between a willing buyer and a willing seller.” Case law has established that the comparable sales method is a better measure for fair market value.
 
Aggregation is applied when similar items are donated, which includes “property of the same generic category or type.” Reg. 1.170A-13(c)(7)(iii). Substantiation requirements become more rigorous as the value increases. For donations of $250 or less, the taxpayer must have records for the date of the contribution, the name and address of the nonprofit and a description that is sufficiently detailed of the item contributed. When contributions exceed $250, the taxpayer must also obtain a CWA from the nonprofit organization. Sec. 170(f)(8)(A).
 
When contributions exceed $500, the taxpayer must substantiate the contribution with a completed Form 8283. Sec. 170(f)(11)(B) and Reg. 1.170A-16(c)(3). Form 8283 requires the fair market value of the property on the contribution date and the cost basis of the contributed property. Reg. 1.170A-16(c)(3)(iv)(D) and (F). Each aggregate value category of goods exceeded $500, Copeland was required to provide IRS Form 8283 to substantiate the charitable contributions.
 
The Court denied Copeland’s deductions for two independent reasons. First, an improper valuation method was used to determine fair market value. Replacement cost was not appropriate for used goods and alternate fair market value was not introduced. Second, taxpayer failed to substantiate the charitable contributions based on the Sec. 170 requirements. Even if fair market value had been established, the substantiation requirements were not met for the aggregate values of each category of goods. Therefore, based on the findings of the Court the noncash deductions were denied for the 2020 tax year. Taxpayer was able to establish proof of charitable contributions in the amount of $170 in cash, these deductions were permitted.   
 
Editor’s Note: The decision serves as a reminder that non-cash donations of property require rigorous documentation and realistic valuation of used goods. If any of the aggregate category values exceed $5,000, the taxpayer is required to substantiate the value of noncash assets with a qualified appraisal.

Copeland v. Dep't of Revenue; TC-MD 240623R

HANNAH COPELAND,
Plaintiff,
v.
DEPARTMENT OF REVENUE, State of Oregon,
Defendant.

IN THE OREGON TAX COURT
MAGISTRATE DIVISION
Income Tax

DECISION

Plaintiff appeals Defendant's Notice of Assessment dated April 23, 2024, (Def's Ex G). Plaintiff challenges Defendant's denial of charitable contribution deductions. A remote trial was held on March 20, 2025, via Webex. Hannah Copeland appeared and testified on her own behalf. Blake Ritz (Ritz), auditor, appeared on behalf of Defendant. Plaintiff's Exhibits 1 to 22 and Defendant's Exhibits A to N were received into evidence.

I. STATEMENT OF FACTS

Plaintiff claimed $14,259 in charitable donations on her 2020 individual income tax return. (Ptf's Ex 12 at 4.) Of that amount, $159 was in cash, while $14,100 was in noncash donations. (Id.) Subsequent to an audit, Plaintiff and Defendant met for a conference. During the conference, Plaintiff submitted two checks to support her cash donation deduction, with a total value of $170, which Defendant allowed. (Def's Ex E at 3.) Plaintiff also offered evidence of her noncash contributions to Goodwill and Brightside Animal Center at the conference. (Def's Ex E at 2.) Plaintiff tracked those donations contemporaneously by keeping donation receipts and recording donation details in a notebook. (Ptf's Ex 14; Ptf's Ex 15.)

At trial, Plaintiff testified that, during the audit, Ritz suggested compiling a spreadsheet to show the condition of donated items. Plaintiff did so, and she listed conditions ranging from “GOOD” to “NEW.” (Ptf's Ex 20.) Plaintiff listed “REPLACEMENT COST NEW” as the method used for determining fair market value (FMV) of 34 donated items and “REPLACEMENT COST USED” as the method used for 3 items.¹ (Id.) The listed acquisition dates of these items vary, with the oldest date being either “Nov-09” or “2010” and the most recent date being December 10, 2019.² (Id.) Many line items state “VARIOUS” as the acquisition date. (Id.)

In a separate table, Plaintiff summarized the values recorded in her notebook by donation date. (Ptf's Ex 15; Ptf's Ex 16.) She assigned each donated item to one of four categories: clothing, household, furniture, and collectibles. (Id.) With the exception of three minor corrections to totals, indicated with brackets, that table is reproduced here:

(Ptf’s Ex 16.)

Plaintiff's notebook describes donating the following property:

(Ptf's Ex 15 at 3-8.)

In determining replacement values, Plaintiff used Facebook Marketplace listings as sources for comparable prices for used goods. (Ptf's Ex 19 at 1-33.) Those listings were for a dining table and chairs, a recliner, an office desk, an ottoman, a shop cart, toys, kids' jackets, a drone, art and craft supplies, home decor, a bedroom set, jewelry, and several dresses. (Id.)

Plaintiff also included five original purchase receipts with her exhibits. (Ptf's Ex 18 at 18-21, 23.) The first receipt is from Wilco and establishes that a pair of boots was purchased for $169.99 but does not contain a legible date. (Id. at 18.) The second receipt is from Lowe's and is dated September 19, 2019. (Id. at 19.) That receipt includes a line for an “MT 5.3-CU FT TL WASHER MV” for $663.03. (Id.) The third receipt is illegible. (Id. at 20.) The fourth receipt is from Best Buy and dated in December 2014. (Id. at 21.) The line-item descriptions are mostly illegible but appear to be nondescriptive part numbers. (Id.) The last receipt is from Lowe's, but the item descriptions and date are illegible. (Id. at 23.)

In addition to those receipts, Plaintiff provided screenshots of several shipping notifications from Amazon. (Ptf's Ex 18 at 1-17.) Some of the screenshots include payment or billing information such as the last four digits of the credit card used or billing address. (e.g., id. at 4-5.) The screenshots contain shipping dates, but not delivery dates or delivery confirmations. (See id. at 1-17.) Plaintiff did not offer any evidence linking the various screenshots to particular donation dates.

Plaintiff provided contemporaneous written acknowledgements (CWAs) from donation recipients for all her donations except the one dated September 14. (Ptf's Ex 14.) According to Plaintiff's notebook, the items donated on September 14 were given to Brightside Animal Center and included a washing machine. (Ptf's Ex 15 at 6.)

II. ANALYSIS

The issues presented are whether Plaintiff established the FMV of her donated property and whether she satisfied the substantiation requirements of Internal Revenue Code (IRC) section 170 and corresponding Treasury Regulations.

Oregon's income tax system generally mirrors federal tax provisions. Johnson v. Dept. of Rev., TC-MD 230350R, 2025 WL 842217 at *2 (Or Tax M Div, Mar 13, 2025). “Insofar as is practicable * * * the department shall * * * follow the administrative and judicial interpretations of the federal income tax law.” ORS 314.011(3).³ Deductions are a “matter of legislative grace,” and the taxpayer bears the burden of “clearly showing the right to the claimed deduction.” INDOPCO, Inc. v. Comm'r, 503 US 79, 84, 112 S Ct 1039, 117 L Ed 2d 226 (1992) (internal quotations omitted).

Here, Plaintiff has failed to clearly show her right to the claimed deduction for at least two reasons. First, her valuation method is inappropriate for the context. Second, Plaintiff has not substantiated certain details the law requires when taxpayers claim charitable deductions. The court analyzes each of these reasons in more detail, beginning with Plaintiff's valuation method.

A. Valuation of Donated Property

A taxpayer who claims a deduction for a charitable donation of more than $500 must establish the FMV of the donated property. Treas Reg §1.170A-16(c)(3)(iv)(D). Treasury Regulation section 1.170A-1(c)(2) defines FMV as “the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.” It follows that the purchase price or replacement cost may sometimes be evidence of FMV, but only if it corresponds to what a willing and knowledgeable buyer would actually pay in the marketplace. See Gardner v. Comm'r, 114 TCM (CCH) 232, 2017 WL 3670197 at *8 (2017) (“For us to eschew comparable sales in favor of replacement cost, the taxpayer must establish, not only the absence of an active market for comparable items, but also a 'probative correlation' between replacement cost and FMV.”)

“Courts have consistently recognized that, in general, comparable sales constitute the best evidence of market value.” United States v. 320.0 Acres of Land, More or Less in Monroe County, State of Fla., 605 F2d 762, 798 (5th Cir 1979) (collecting cases at id. n 61). For items such as used clothing and household goods, this court has recognized that replacement cost new is not a reliable measure of FMV. Gordin v. Dept. of Rev., TC-MD 050698C, 2006 WL 1083381 at *3 (Or Tax M Div, Apr 25, 2006) (citing Internal Revenue Service (IRS) Publication 561).⁴

In valuing her donations, Plaintiff relied almost exclusively on “replacement cost new,” using as her benchmark either (1) original Amazon retail prices of her donated goods when they were new, or (2) current Facebook Marketplace comparables. The original prices paid to Amazon do not establish current FMV because they do not reflect that the donated items were used and, in some cases, several years old. Plaintiff also did not offer testimony or documentary evidence establishing which comparables she used when estimating values for her various donations. For instance, Plaintiff also failed to demonstrate how the Facebook Marketplace listings correspond to her donated items. Multiple comparables provided are for items not even listed in Plaintiff's notebook. As a result, her valuations do not establish FMV. The failure to prove FMV is one reason the court holds that Plaintiff's claim for noncash deductions is denied.

B. Aggregation and Substantiation Requirements

The court turns to its second reason for denying Plaintiff's appeal: insufficient substantiation. Taxpayers claiming charitable donation deductions must satisfy statutory substantiation requirements. IRC section 170(f)(11)(F) requires different levels of documentation depending on the aggregate value of similar items donated. Similar items are defined as “property of the same generic category or type.” Treas Reg §1.170A-13(c)(7)(iii). Congress's intent in imposing heightened reporting requirements, including the requirement to aggregate small donations of similar property into a single total, was “to give the IRS tools that would enable it to identify inflated charitable contribution deductions.” Oakhill Woods, LLC v. Comm'r, 119 TCM (CCH) 1144, 2020 WL 730895 at *7 (2020).

Substantiation requirements become more stringent as the total value of donations increases. Below $250, basic records suffice. See Treas Reg §1.170A-16(a)(1) (requiring (i) the name and address of the donee, (ii) the date of the contribution, and (iii) a description of the property in sufficient detail under the circumstances). For contributions of $250 or more, the taxpayer must obtain a CWA from the donee organization. IRC §170(f)(8)(A).

For a contribution over $500, the taxpayer must substantiate the contribution with a completed Form 8283. IRC §170(f)(11)(B); Treas Reg §1.170A-16(c)(3). A completed Form 8283 includes, among other things, the FMV of the property on the date the contribution was made and the cost or other basis of the property. Treas Reg §1.170A-16(c)(3)(iv)(D), (F).

In this case, Plaintiff asserts her clothing donation totaled $4,425, household goods totaled $3,192, furniture totaled $4,983, and collectibles totaled $1,500. The court is satisfied with this aggregation. Each category exceeds $500, so Plaintiff was required to maintain and provide detailed acquisition records to substantiate the deduction claimed on her tax return. While she did obtain CWAs and file Form 8283s with her return, Plaintiff failed to substantiate basic required information. Specifically, for all donated items except one, Plaintiff failed to establish acquisition cost. Even where Plaintiff provided original receipts, information is incomplete or illegible. For instance, the receipt from Lowe's for the washing machine does have a legible date and amount, but Plaintiff did not provide a CWA for that donation.

C. Summary

Plaintiff's deductions must be denied for two independent reasons: (1) improper valuation method, and (2) failure to meet substantiation requirements. Plaintiff's reliance on replacement cost new fails to establish FMV. Without evidence of what a willing buyer would pay for used goods, the court has no basis to determine value. Additionally, even if FMV were proven, the aggregation rules place Plaintiff's donations in the over-$500 category for each type of property. She was therefore required to provide adequate acquisition and cost basis records, which she did not. These failures mean that none of Plaintiff's noncash donations may be deducted.

III. CONCLUSION

After careful review of the evidence, the court finds that Plaintiff did not establish the fair market value of her noncash donations and did not meet the substantiation requirements of IRC section 170. Now, therefore,

IT IS THE DECISION OF THIS COURT that Plaintiff is entitled to a charitable contribution deduction for the $170 in cash contributions, but Plaintiff is not entitled to a deduction for noncash contributions for the 2020 tax year.

RICHARD D. DAVIS
MAGISTRATE

If you want to appeal this Decision, file a complaint in the Regular Division of the Oregon Tax Court, by mailing to: 1163 State Street, Salem, OR 97301-2563; or by hand delivery to: Fourth Floor, 1241 State Street, Salem, OR.

Your complaint must be submitted within 60 days after the date of this Decision or this Decision cannot be changed. TCR-MD 19 B.

This document was signed by Magistrate Richard D. Davis and entered on September 15, 2025.

FOOTNOTES

¹Plaintiff's spreadsheet has line-item entries numbered from 1 to 36, but there are two lines numbered 35, resulting in a total of 37 entries. (Id.)

²Regarding the “Nov-09” entry, it is unclear whether this indicates November 2009, or November 9th of an unspecified year. (Ptf's Ex 20 at 1.)

³The court's references to the Oregon Revised Statutes (ORS) are to the 2019 edition.

⁴“The FMV of used household goods, such as furniture, appliances, and linens, is usually much lower than the price paid when new.” IRS Publication 561 (Feb 2020). “Used clothing and other personal items are usually worth far less than the price you paid for them.” Id.