Contents

FUNDAMENTAL CONCEPTScounsel advice memoranda.) This body of law is specific on various aspects ofthe law of charitable giving, as the pages of this book attest.Despite this extensive treatment of these aspects of the law, there is a dramaticomission in the rules concerning charitable giving; the federal law isscarce on the meaning of the word gift or contribution. 1 This is highly significant,because there obviously must be a gift before there can be a charitable gift (andone or more charitable contribution deductions).(a) General RulesThere are two ways to view the concept of a charitable gift: from the standpointof the contributor and the standpoint of the recipient charity.Contributor’s Standpoint. Integral to the concept of the charitable contributiondeduction, then, is the fundamental requirement that money or property transferredto a charitable organization be transferred pursuant to a transaction thatconstitutes a gift. 2 Just because money is paid, or property is transferred, to acharitable, educational, religious, or like organization, does not necessarily meanthat the payment or transfer is a gift. Consequently, when a university’s tuition,a hospital’s health care fee, or an association’s dues are paid, there is no gift, andthus there is not a charitable deduction for the payment. 3 These are situations inwhich the absence of a gift is because the payor received a material quid pro quoin exchange for the payment. 4Certainly, there is some law, most of it generated by the federal courts, as towhat constitutes a gift. (The Internal Revenue Code and the tax regulations areessentially silent on the subject.) Basically, the meaning of the word gift has twoelements: it is a transfer that is voluntary and is motivated by something other thanconsideration. 5 Thus, the income tax regulations (promulgated in amplification ofthe business expense deduction rules) state that a transfer is not a contributionwhen it is made “with a reasonable expectation of financial return commensuratewith the amount of the donation.” 6 Instead, this type of payment is a purchase (ofa product and/or a service). Thus, the IRS states that a contribution is:A voluntary transfer of money or property that is made with no expectationof procuring financial benefit commensurate with the amount of the transfer. 71 By contrast, most state charitable solicitation statutes contain a definition of the term gift. See Fundraising § 4.1.2 For these purposes, the terms contribution, gift, and donation have the same meaning. The prospects of a transactionbeing considered a gift may be evaluated from the standpoint of the ostensible contributor and the charitableorganization involved.3 See, e.g., Channing v. United States, 4 F. Supp. 33 (D. Mass. 1933), aff’d per curiam, 67 F.2d 986 (1st Cir.1933), cert denied, 291 U.S. 686 (1934); McLaughlin v. Commissioner, 51 T.C. 233 (1968), aff’d, 69-2U.S.T.C. 9467 (1st Cir. 1969); Ryan v. Commissioner, 28 T.C.M. (CCH) 1120 (1969); Oppewal v. Commissioner,30 T.C.M. (CCH) 1177 (1971); Winters v. Commissioner, 30 T.C.M. (CCH) 1238 (1971); Summers v.Commissioner, 33 T.C.M. (CCH) 695 (1974); Brotman v. Commissioner, 36 T.C.M. (CCH) 279 (1977); Bassv. Commissioner, 46 T.C.M. (CCH) 1262 (1983); Whitaker v. Commissioner, 67 T.C.M. (CCH) 2408 (1994);Rev. Rul. 68-432, 1968-2 C.B. 104; Rev. Rul. 54-580, 1954-2 C.B. 97.4 See § 3.1(b).5 Consideration is something being received (usually, goods and/or services) in return for a payment. When paymentsare made to receive something in exchange, the transaction is in the nature of a contract.6 Reg. § 1.162-15(b).7 Reg. § 1.170A-1(c)(5). 58