In the case of Belair Woods LLC v. Commissioner, TC Memo 2018-159, the Tax Court found that a taxpayer had neither fully nor constructively complied with the documentation requirements for a charitable contribution. The Court held that this action constituted a failure in compliance despite the taxpayer having received advice from a consultant that an attorney had indicated that providing basis in the case of a contribution was not truly required.
However, the Court determined that even though the taxpayer’s position was clearly wrong, there was still a possibility the taxpayer might be able to show it had reasonable cause for its failure that could preserve the deduction. However, whether it had such cause or not must be determined in a later proceeding, since several material facts remained to be shown by the taxpayer to justify its reliance on the information relayed from the attorney.
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