jan elizabeth van dusen petitioner v commissioner of internal revenue respondent docket no filed date p incurred unreimbursed volunteer expenses while caring for foster cats in her private residence p’s expenses consisted primarily of payments for veterinary services pet supplies cleaning supplies and household utilities p claimed a dollar_figure charitable-contribution deduction for the expenses on her tax_return r issued a notice_of_deficiency denying the deduction r claims that p did not render services to a qualifying charitable_organization under sec_170 i r c and that p failed to substantiate her expenses under sec_170 i r c and sec_1_170a-13 income_tax regs r also asserts that p’s expenses have an indistinguishable personal component held p’s foster-cat expenses qualify as unreim- bursed expenditures incident to the rendition of services to a charitable_organization see sec_1_170a-1 income_tax regs p’s services were directed by a charitable_organization p thus rendered services to a sec_170 i r c organization when she cared for foster cats in her home some of p’s expenses are disallowed because they are insufficiently related to foster-cat care or cannot be determined with preci- sion held further the recordkeeping requirements of sec_1_170a-13 income_tax regs for contributions of money govern unreimbursed volunteer expenses of less than dollar_figure held further p’s records meet the requirements of sec_1_170a-13 income_tax regs because they are acceptable substitutes for canceled checks under the substantial compli- ance doctrine see 100_tc_32 p can deduct foster-cat expenses of less than dollar_figure held fur- ther p cannot deduct foster-cat expenses of dollar_figure or more p did not obtain the contemporaneous written acknowledgment from the charitable_organization required under sec_1 170a- f income_tax regs held further p can deduct a dollar_figure check donation made to a separate charitable_organization jan elizabeth van dusen pro_se christina e ciu and rebecca duewer-grenville respondent for verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila united_states tax_court reports morrison judge the commissioner of internal revenue the irs issued a notice_of_deficiency for the tax_year to petitioner jan elizabeth van dusen determining an income-tax deficiency of dollar_figure the parties settled all issues except those relating to a dollar_figure charitable-contribution deduction for ms van dusen’s expenses of taking care of foster cats we find that taking care of foster cats was a service per- formed for fix our ferals a sec_501 organization that specializes in the neutering of wild cats see infra part i some of van dusen’s expenses are categorically not related to taking care of foster cats and are therefore not deductible these expenses are the cost of cremating a pet cat bar association dues and dmv fees see infra part ii some of van dusen’s other expenses are not solely attributable to foster-cat care and are not deductible these expenses are the cost of repairing her wet dry vacuum and her member- ship dues at a store see infra part iii other expenses are attributable to the services van dusen provided to fix our ferals these expenses are percent of her veterinary expenses and pet supplies and percent of her cleaning supplies and utility bills see infra part iv b some pay- ments to orchard supply hardware and lowe’s for pet sup- plies however are disallowed because the amounts spent on pet supplies cannot be determined with precision see infra part iv a in deciding whether van dusen kept adequate_records of the expenses attributable to her volunteer services we hold that the regulatory requirements for money con- tributions govern van dusen’s expenses of less than dollar_figure see infra part iv c a van dusen has met the requirements for these less-than-dollar_figure expenses her records are acceptable substitutes for canceled checks under the substantial compli- ance doctrine see infra part iv c b for expenses of dollar_figure or more however van dusen does not have contempora- neous written acknowledgment from fix our ferals see the charitable-contribution deduction for foster-cat expenses was the only item the parties presented for decision the record however includes documentation of four expenses that are unrelated to foster-cat care these expenses are the cost of cremating a pet cat bar association dues dmv fees and a dollar_figure check to island cat resources and adoption van dusen testified about the pet cat cremation and the dollar_figure check to island cat resources and adoption but not the bar association dues or dmv fees we address all of these expenses for the sake of complete- ness unless otherwise indicated all section references are to the internal_revenue_code in effect for the year at issue all rule references are to the tax_court rules_of_practice and procedure verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila van dusen v commissioner infra part iv c therefore these expenses are not deduct- ible we also hold that van dusen is entitled to a dollar_figure deduc- tion for a check donation to island cat resources and adop- tion a sec_170 organization see infra part vi findings_of_fact we adopt the stipulation of facts and its attached exhibits van dusen a resident of oakland california is an attorney who cared for cats in her private residence in van dusen volunteered for an organization called fix our ferals and argues that her out-of-pocket expenses for caring for cats qualify as charitable_contributions to that organization the parties stipulate that fix our ferals is a sec_501 organization we find that fix our ferals is eligible to receive tax-deductible contributions under sec_170 fix our ferals and trap-neuter-return fix our ferals’ mission is to engage in trap-neuter- return activities which consist of trapping feral cats neutering them obtaining necessary medical treatments and vaccinations and releasing them back into the wild fix our ferals enlists volunteers to perform these tasks the volunteers usually return cats to their original neighbor- hoods but sometimes cats are moved to safer neighborhoods the purpose of trap-neuter-return is to humanely control feral cat populations and ensure that the cats live in an environment where people are not hostile to them fix our ferals periodically organizes spay neuter clinics and educates the public about trap-neuter-return as a solution to neighbor- hood cat issues we take judicial_notice of irs publication cumulative list of organizations described in sec_170 of the internal_revenue_code_of_1986 as effective for see viralam v commissioner 136_tc_151 citing irs publication as evidence of orga- nization’s sec_170 status jennings v commissioner tcmemo_2000_366 same affd 19_fedappx_351 6th cir fix our ferals was listed in irs publication in a feral cat is a nondomesticated cat neutering refers to the sterilization of animals of both sexes we use the term interchange- ably with spay neuter in the context of trap-neuter-return returning feral cats to the wild means returning them to an outdoor living environment that is generally urban or suburban the intent is for the cats to continue to live in human-populated neighborhoods rather than move to animal-only habi- tats verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila united_states tax_court reports after being neutered the cats must be temporarily housed in volunteers’ private residences while they recover after the cats recover and have received all necessary medical treat- ments they are usually returned to the wild some cats cannot be safely returned to the wild typically those cats are young sick injured elderly or tame those cats must be cared for domestically we refer to all care for trapped cats including temporary housing while cats are recuperating from neutering as foster care we refer to cats under foster care as foster cats some of the cats are not returned to the wild because they are already tame volunteers try to tame the other cats that cannot be returned to the wild to make them suitable for adoption the volunteers then attempt to place the tame cats in no-kill shelters or adoptive homes the success of placing the tame cats depends on shelter availability and people’s willingness to adopt although some of the cats that cannot be returned to the wild are adopted or given to shelters others remain in foster care indefinitely more often these cats are sick elderly or have other problems requiring long-term care fix our ferals encourages volunteers to provide long-term care for these cats in their homes foster care both short and long term forms an important part of the organization’s mission fix our ferals’ administrative structure fix our ferals is a decentralized organization it has no formal administrative office instead it uses a post office box a telephone hotline a website and other internet- and phone-based methods of communication fix our ferals’ official staff as far as we can surmise con- sists of a board_of directors and a team of veterinarians the organization relies on a base of volunteers who trap cats transport cats foster cats staff spay neuter clinics educate the public screen phone calls raise funds and recruit volun- teers some fix our ferals volunteers are members of an informal internet message group through which they coordi- nate logistics and assist each other with cat-related issues volunteers also collaborate informally with other cat rescue groups and individuals fix our ferals does not commonly sometimes volunteers capture tame stray cats when they attempt to trap feral cats verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila van dusen v commissioner reimburse volunteers for expenses it does however some- times provide vouchers for free neutering services it also reimburses volunteers for emergency care if complications arise after a cat has been neutered at a fix our ferals clinic van dusen’s role with fix our ferals van dusen was a fix our ferals volunteer in she trapped feral cats had them neutered obtained vaccinations and necessary medical treatments housed them while they recuperated and released them back into the wild she also provided long-term foster care to cats in her home she attempted to place long-term foster cats in one of two no-kill shelters berkeley east bay humane society or east bay society for the prevention of cruelty to animals or other- wise find them adoptive homes some foster cats however stayed with her indefinitely in van dusen had between and cats total of which approximately were pets the pet cats had names but the foster cats generally did not most cats roamed freely around van dusen’s home except for bathrooms and resided in common areas less domesticated cats stayed in a sepa- rate room called the feral room some cats lived in cages for taming others lived in cages because of illness van dusen devoted essentially her entire life outside of work to caring for the cats each day she fed cleaned and looked after the cats she laundered the cats’ bedding and sanitized the floors household surfaces and cages van dusen even purchased a house with the idea of fostering in mind her house was so extensively used for cat care that she never had guests over for dinner van dusen obtained foster cats primarily through the trap- neuter-return work that she personally performed she cap- tured homeless cats had them neutered cared for them during recovery and if possible returned them to the wild she housed the cats that could not be returned to the wild until an adoption opportunity arose she obtained the rest of her cats through a loose network of contacts some came from fix our ferals affiliates or from the fix our ferals hot- van dusen and other witnesses sometimes referred to this organization as oakland society for the prevention of cruelty to animals verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila united_states tax_court reports line or internet message group others came from individual volunteers or other cat rescue organizations van dusen’s foster care arrangements arose informally usually by her personal decision or through a series of phone calls emails internet postings or in-person conversations some cats that she cared for in had been under her care in previous years during which she belonged to organizations other than fix our ferals van dusen’s inability to recall precisely how she acquired each of her cats makes it difficult to ascertain how many cats are attributable to a particular organization or contact person although fix our ferals was her primary volunteer affiliation in she admits that she did sometimes assist other groups that year van dusen therefore cannot trace all her foster cats in to fix our ferals van dusen’s cat-care expenses van dusen paid out-of-pocket for most of her cat-care expenses vouchers covered some of the neuterings but van dusen paid all other veterinary expenses including tests treatment vaccines and surgery van dusen expended significant amounts on in-home care as well she purchased large quantities of pet supplies and cleaning supplies she renewed her costco membership so she could buy cat food and cleaning supplies at lower prices she repaired her wet dry vacuum so she could easily clean the floors van dusen incurred higher electricity and gas bills because she laundered many loads of cat bedding and ran a special ventilation system to ensure fresh air the fre- quent laundering also increased her water bills her garbage bills increased because of the high volume of cat-related waste we refer to van dusen’s veterinary pet supply cleaning supply utility costco membership renewal and wet dry vacuum repair expenses collectively as her cat-care expenses a portion of van dusen’s cat-care expenses was attrib- utable to personal_use and the rest was attributable to foster cats we refer to the portion of cat-care expenses attributable pet supplies refers to pet food pet medicine woodstove pellets for cat litter litter boxes pet dishes and other miscellaneous cat-specific supplies cleaning supplies refers to garbage bags paper towels laundry detergent dish detergent and other cat-related supplies that were not exclusively used for cats verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila van dusen v commissioner to foster cats as foster-cat expenses the precise amount of van dusen’s foster-cat expenses is unclear because her records do not distinguish personal expenses from foster-cat expenses van dusen’s recordkeeping and reporting van dusen introduced the following evidence as proof of her foster-cat expenses check copies bank account state- ments credit card statements a thornhill pet hospital client account history a costco purchase history pacific gas electric invoices a waste management payment history for garbage removal and an east bay municipal utility district billing history for water all the data in the documents was recorded contemporaneously in van dusen states that she initially had more substantial records of her foster-cat expenses namely itemized receipts but that her tax pre- parer cary cheng told her they were unnecessary for pre- paring her original return those records have since dis- appeared van dusen compiled the documents she introduced at trial by searching through other records and requesting records from third parties on her tax_return van dusen deducted dollar_figure on schedule a itemized_deductions for noncash charitable con- tributions attributable to a cat rescue operation the return stated that the dollar_figure comprised dollar_figure of supplies dollar_figure of veterinary bills and dollar_figure of utilities it is unclear precisely how van dusen arrived at these numbers an unnamed friend had totaled the cat rescue operation expenses using now-missing receipts but we have no evi- dence of what method if any her friend used to separate deductible expenses from nondeductible expenses the friend prepared a worksheet summarizing the calculations but this document is not in evidence the irs disallowed the entire deduction van dusen’s petition asserts that she is entitled to a deduction of at least dollar_figure for foster-cat expenses on we address the calculation of foster-cat expenses infra pts iii and iv we refer to the documents as check copies because they are photocopies of carbon copies of the original checks after writing the checks van dusen presumably kept the carbon copies for her records it is unclear whether supplies referred to just pet supplies and cleaning supplies or wheth- er it also included the cost of renewing van dusen’s costco membership and the cost of repair- ing her wet dry vacuum at trial van dusen made clear that she seeks a deduction for all of these expenses-pet supplies cleaning supplies costco membership renewal and wet dry vacu- um repair verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila united_states tax_court reports the basis of her testimony we believe van dusen now seeks a deduction for the expenses using the following percentage estimates percent of veterinary expenses pet supplies paper towels and garbage bags and percent of laundry detergent dish detergent utilities and costco membership renewal see infra part iv b van dusen also seeks to deduct the cost of her wet dry vacuum repair but her percentage estimate for this expense is unclear opinion a taxpayer has the burden of proving the irs’s determina- tion of deficiencies incorrect see rule a 290_us_111 the burden shifts to the irs if the taxpayer introduces credible_evidence with respect to a factual issue the taxpayer has complied with the substantiation requirements of the internal_revenue_code the taxpayer has maintained all required records and the taxpayer has cooperated with reasonable irs requests for information sec_7491 our conclusions here however are based on the preponderance_of_the_evidence and thus the allocation of the burden_of_proof is immaterial see 110_tc_189 ndollar_figure i caring for foster cats was a service to fix our ferals sec_170 allows a deduction for any charitable con- tribution made by the taxpayer a charitable_contribution is defined as a contribution or gift to or for_the_use_of a charitable_organization sec_170 a typical charitable con- tribution is donating money or property directly to a chari- table organization a second type of charitable_contribution is placing money or property in trust for a charitable organiza- tion such a transfer is in the words of sec_170 a con- tribution for_the_use_of a charitable_organization see 495_us_472 a third type of charitable_contribution occurs when a taxpayer performing services for a charitable_organization incurs unreimbursed expenses as sec_1_170a-1 income_tax regs states no deduction is allowable under sec_170 for a contribu- tion of services however unreimbursed expenditures made incident to the rendition of services to an organization con- verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila van dusen v commissioner tributions to which are deductible may constitute a deduct- ible contribution van dusen did not contribute money or property directly to fix our ferals van dusen did not place property in trust for fix our ferals or enter into a formal arrangement giving the organization legal rights to her property instead she paid third parties for veterinary services pet supplies cleaning supplies utilities costco membership renewal and wet dry vacuum repair thus van dusen is entitled to a charitable-contribution deduction only if these expenses were in the words of sec_1_170a-1 income_tax regs expenditures made incident to the rendition of services to fix our ferals the irs contends that van dusen was an independent cat rescue worker whose services were unrelated to fix our ferals and did not benefit the organization we reject this assertion finding that van dusen’s care for foster cats con- stituted services to fix our ferals in determining whether a taxpayer has provided services to a particular organization courts consider the strength of the taxpayer’s affiliation with the organization the organiza- tion’s ability to initiate or request services from the taxpayer the organization’s supervision over the taxpayer’s work and the taxpayer’s accountability to the organization see eg 60_tc_988 54_tc_722 for example smith v commissioner supra pincite held that church members could deduct evangelism travel_expenses even though their church never initiated controlled supervised or assisted with the trips the church encouraged missionary work in general and before the taxpayers embarked on a trip the church gave them letters of commendation which evidenced the church’s approval and served as introductions to intrafaith groups during the trip id pincite additionally after each trip the church members reported back to the the expenses of rendering services are deductible because they constitute contributions to the charitable_organization 676_f2d_35 2d cir in de- termining whether unreimbursed volunteer expenses were governed by a statutory provision of the code that treated favorably contributions to a charitable_organization court held that unreimbursed volunteer expenses were contributions to -not for_the_use_of -a charitable or- ganization affg 76_tc_178 see also 495_us_472 in holding that no deduction is available when a taxpayer pays a service provider’s ex- penses court stated that unreimbursed expenses of rendering services are contributions to a charitable_organization within the meaning of sec_170 verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila united_states tax_court reports church which then publicized their efforts and accomplish- ments to other congregations id by contrast in saltzman v commissioner supra the taxpayer’s activities had much looser ties to the charitable_organization the taxpayer was the leader of the harvard-radcliffe hillel folk dance group id pincite without the organization’s asking him he trav- eled alone to europe and pittsburgh to attend folk dance fes- tivals that were not sponsored by the organization id pincite we held that the taxpayer had not provided services to the organization partly because the organization had not directed or encouraged him to attend the festivals id pincite van dusen has demonstrated a strong connection with fix our ferals she was a regular fix our ferals volunteer who performed substantial services for the organization in she engaged in both trapping and foster care and worked closely with other fix our ferals volunteers fix our ferals could initiate or request services from van dusen through individual volunteers who would contact her by phone or by internet like the church in smith fix our ferals encour- aged and indirectly oversaw van dusen’s work see smith v commissioner supra pincite nothing in sec_170 or in sec_1 a of the regulations suggests that as a condition to the deductibility of unreimbursed service- related expenses the services must be performed under the control or supervision of the charitable_organization van dusen’s inability to trace her cat rescue work exclu- sively to fix our ferals does not pose an insurmountable bar to deductibility we find that she performed most of her work in for fix our ferals moreover all of the other organizations with which she was affiliated and therefore to which she may have provided services qualify as sec_170 organizations fix our ferals volunteers regularly received requests for assistance and would solicit help from other volunteers on behalf of third parties if volunteers encountered problems during their work they would also contact other volunteers for assistance sec_1 a income_tax regs was the predecessor to sec_1_170a-1 income_tax regs the provision that currently allows taxpayers to deduct unreimbursed volunteer expenses these organizations are island cat resources and adoption berkeley east bay humane society east bay society for the prevention of cruelty to animals and second chance cat res- cue all of these organizations were listed in irs publication in see jennings v com- missioner tcmemo_2000_366 concluding that donees were not sec_170 organizations be- cause they were not listed in irs publication supra note taking judicial_notice of irs publication a cumulative list of sec_170 organizations verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila van dusen v commissioner the irs also contends that even if van dusen was affili- ated with fix our ferals fix our ferals’ mission consists solely of education and sterilization and therefore fostering cats could not constitute services to fix our ferals as our fact findings explained however the organization’s mission encompasses foster care fix our ferals actively recruits vol- unteers to foster cats during spay neuter recovery and it encourages volunteers to provide sanctuary for cats requiring long-term care thus van dusen served fix our ferals’ mis- sion by fostering cats the remainder of this opinion con- siders which of van dusen’s expenses are deductible as inci- dental to foster-cat volunteer work ii pet-cat cremation expense bar association dues and dmv fees as we have found van dusen rendered services to fix our ferals to be deductible unreimbursed expenses must be directly connected with and solely attributable to the ren- dition of services to a charitable_organization e g saltzman v commissioner t c pincite babilonia v commissioner tcmemo_1980_207 affd per curiam 681_f2d_678 9th cir in applying this standard courts have considered whether the charitable work caused or necessitated the tax- payer’s expenses for example in 343_f2d_553 5th cir the court disallowed deductions for the expenses of insuring and repairing two vehicles because the expenses were not solely attributable to charitable use the taxpayer had used the vehicles partly for personal_use and would have incurred the expenses regard- less of any charitable work id similarly in mccollum v commissioner tcmemo_1978_435 we denied national ski patrol volunteers’ deductions for ski equipment because the volunteers owned the equipment and could use it for per- sonal recreation we also denied deductions for motor home use and food given to non-volunteering family members id and in smith v commissioner t c pincite we disallowed meal laundry and camping expenses_incurred for non-pros- elytizing children who had accompanied the taxpayers on an evangelical mission van dusen’s documentation includes the following non- foster-cat expenses an dollar_figure credit card charge to bubbling verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila united_states tax_court reports well pet memorial a dollar_figure check to the california state bar association and a dollar_figure check to the dmv the dollar_figure charge to bubbling well pet memorial is not deductible because this expense was for the cremation of a pet cat the checks to the california state bar association and the dmv are not deduct- ible because they are not charitable expenses iii costco membership dues and wet dry vacuum repair van dusen has not shown that any portion of her costco membership dues or wet dry vacuum repair costs constitutes an exclusively charitable expense like the vehicles in orr v united_states supra the costco membership and the wet dry vacuum served both personal and charitable purposes we conclude that van dusen would have paid for her costco membership and repaired her vacuum even if she had not fostered cats thus these expenses were not directly con- nected with and solely attributable to charitable activities iv veterinary expenses pet supplies cleaning supplies and utilities one broad category of van dusen’s expenses-veterinary expenses pet supplies cleaning supplies and utilities-was partly incidental to her services to fix our ferals if van dusen had not fostered cats she would have paid for fewer veterinary services fewer pet supplies and fewer cleaning supplies her utility bills would have been significantly lower because she would not have had to run a special ventilation system do as much laundry or dispose_of as much cat waste we find that the portions of these expenses attributable to caring for foster cats were directly connected with and solely attributable to van dusen’s services to fix our ferals a some payments to orchard supply hardware and lowe’s must be categorically disallowed van dusen purchased bags of woodstove pellets from orchard supply hardware and lowe’s she used woodstove pellets as cat litter unfortunately van dusen’s documents show only the total_payment she made for each visit to these stores her documents do not reveal what items she pur- see definitions of pet supplies and cleaning supplies supra notes and verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila van dusen v commissioner chased thus the documents alone do not show how much she spent on pellets she does not claim that she purchased any other items whose costs would be deductible we there- fore must determine on the basis of her testimony what por- tions of her payments to the two stores were for pellets in determining the amounts that van dusen spent on pel- lets from orchard supply hardware and lowe’s we divide her shopping trips to these stores into two types with the first type of shopping trip the amount of each payment was an exact multiple of dollar_figure625 the price of one bag of pel- lets the payments for this type of trip are check nos and and orchard supply hardware purchases on october october november and date as reflected in van dusen’s bank statements we believe that on the first type of shopping trip van dusen indeed purchased bags of pellets and nothing else with the second type of shopping trip the amount of each payment was not an exact multiple of the dollar_figure625 price of a bag of pellets for each trip van dusen testified as to how much she spent on pellets she claimed that she either purchased eight bags of pellets for dollar_figure dollar_figure625 bag bags or purchased the maximum number of bags of pel- lets that could have been purchased with the dollar amount spent while we generally find van dusen a credible wit- ness van dusen provides no basis for us to presume that every trip involved the purchase of either eight bags of pellets or as many bags of pellets as could be purchased van dusen had other payees besides orchard supply hardware and lowe’s for one of the other payees-costco-van dusen introduced a document that described each item she pur- chased for the other payees van dusen does not have documents showing what items she pur- chased but this fact is insignificant because it is evident that the payments were entirely re- lated to cat care for example her payments to a veterinarian were entirely for cat medical_care we determined the per-bag cost of pellets by dividing dollar_figure by van dusen testified credibly that the cost of eight bags of pellets in was dollar_figure this amount appeared fre- quently in her documentation as the amount she paid to orchard supply hardware we believe that the amount dollar_figure includes the sales_tax on the purchase which is why dividing dollar_figure by yields a number that includes a fraction of a penny as opposed to a round number for instance check no shows van dusen paid dollar_figure to orchard supply hardware van dusen testified that on the check no shopping trip she bought seven bags of pellets for dollar_figure and presumably spent the remaining dollar_figure on other things she apparently com- puted the dollar_figure amount by multiplying dollar_figure625 by the product of and dollar_figure625 turns out to be dollar_figure375 which rounded to the nearest cent is dollar_figure verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila united_states tax_court reports by the payment amount reflected on her documentation therefore we exclude the following payments from calcula- tion check nos and orchard supply hardware purchases on may and date as reflected in van dusen’s credit card state- ments and an orchard supply hardware purchase on date as reflected in van dusen’s bank statements b percentages of veterinary expenses pet supplies cleaning supplies and utility bills attributable to foster-cat care of the expenses for veterinary care pet supplies cleaning supplies and household utilities we have explained that some of the expenses ie some of the orchard supply hard- ware and lowe’s purchases must be disallowed entirely of the remaining amounts we must consider what portions were attributable to foster-cat care van dusen estimates that foster cats were responsible for the following percent- ages of expenses percent of veterinary expenses percent of pet supplies percent of paper towels and garbage bags percent of laundry detergent and dish detergent and percent of household utility bills van dusen’s percentage estimates for veterinary expenses and pet supplies are reasonable van dusen had about pet cats and to total cats in in general the cat-care costs were distributed equally among pet cats and foster cats thus we conclude that approximately percent of we believe van dusen chose eight bags of pellets as an estimate because the cost of eight bags-dollar_figure-is the most common amount in her documentation for orchard supply hardware purchases however we are not convinced that van dusen purchased eight bags of pellets so regularly that dollar_figure can be used as a default estimate for shopping trips unless otherwise stated dates regarding van dusen’s credit card statements refer to the transaction date not the posting date van dusen also estimates that percent of the cost of her costco membership renewal was attributable to foster cats we do not discuss the costco membership renewal here because we find that no portion of it was attributable to foster cats see supra pt iii for the same reason we do not discuss the wet dry vacuum repair for which van dusen’s percentage esti- mate is unclear van dusen testified that the foster cats caused a disproportionate amount of the veterinary expenses however she has not indicated a basis for determining the precise percentage of vet- verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila van dusen v commissioner the veterinary and pet supply expenses was attributable to foster cats we determine that percent of van dusen’s cleaning supply and utility expenses was attributable to foster cats van dusen believes the foster cats actually accounted for around percent percent or even percent of her cleaning and utility expenses however she cannot prove precisely how much the foster cats contributed to these expenses we determine that all the cleaning supplies-paper towels garbage bags laundry detergent and dish deter- gent-should be counted using the same percentage estimate van dusen has not shown why paper towels and garbage bags had a smaller personal_use component than laundry detergent and dish detergent we consider percent a suffi- ciently conservative estimate to ensure that no personal expenses are counted van dusen ran a large-scale foster cat operation the number of cats in her home caused consider- able expenses she laundered bedding several times a week and she frequently sanitized floors and surfaces she also ran a special ventilation system and disposed of all cat-related waste under these circumstances it seems highly unlikely that foster cats accounted for less than percent of her cleaning and utility expenses we find that percent of the veterinary expenses per- cent of the pet supplies percent of the cleaning supplies and percent of the utility bills are foster-cat expenses and therefore charitable these percentage estimates apply to orchard supply hardware and lowe’s expenses only to the extent that van dusen’s documentation provides a precise amount for each cat-care expense see supra part iv a the table below lists van dusen’s payees and the expense cat- egory into which we classify van dusen’s payments to them ie veterinary expenses pet supplies cleaning supplies or utilities payee foster-cat expense category thornhill pet hospital st louis vet clinic bay area veterinary specialist berkeley dog and cat hospital veterinary expenses veterinary expenses or pet supplie sec_1 veterinary expenses veterinary expenses erinary expenses attributable to foster cats we therefore treat veterinary expenses as if they were incurred proportionally between pet cats and foster cats verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila united_states tax_court reports payee foster-cat expense category deanne jarvis revival animal health orchard supply hardware lowe’s pet vet pet food pet club costco pacific gas electric waste management east bay municipal utility district veterinary expenses veterinary expenses or pet supplie sec_1 pet supplies pet supplies veterinary expenses or pet supplie sec_1 pet supplies pet supplies or cleaning supplies item by item utilities utilities utilitie sec_1 it is unnecessary to determine the precise category under which each payment falls because both veterinary expenses and pet supplies are percent charitable van dusen’s foster-cat expenses however are deductible only to the extent that she has substantiated them a point we consider next c whether van dusen’s expenses are adequately substan- tiated charitable deductions are subject_to the recordkeeping requirements of sec_1_170a-13 income_tax regs for contributions of money or sec_1_170a-13 income_tax regs for contributions of non-money property contributions of dollar_figure or more must satisfy not only these recordkeeping requirements but also the requirements of sec_1 170a- f income_tax regs therefore we divide van dusen’s expenses into expenses of less than dollar_figure and expenses of dollar_figure or more we evaluate whether each expense satisfies the requirements for its category van dusen has met the recordkeeping requirements for her foster-cat expenses of less than dollar_figure a unreimbursed volunteer expenses of less than dollar_figure are governed by sec_1_170a-13 income_tax regs not sec_1_170a-13 income_tax regs sec_1_170a-13 income_tax regs divides contributions of less than dollar_figure into only two categories contributions of the requirements of sec_1_170a-13 income_tax regs do not apply to separate con- tributions of less than dollar_figure made to the same donee even if the aggregate donations to the donee exceed dollar_figure within the same taxable_year verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila van dusen v commissioner money and contributions of property other than money see sec_1_170a-13 and b income_tax regs the regula- tions do not expressly state whether a contribution through the payment of unreimbursed volunteer expenses is subject_to the requirements for contributing money set forth in sec_1_170a-13 income_tax regs the requirements for contributing non-money property set forth in sec_1 170a- b income_tax regs or neither set of requirements the idea that unreimbursed volunteer expenses are free from recordkeeping requirements is implausible therefore one of the two sets of rules must govern those expenses of the two sets of recordkeeping rules we hold that sec_1_170a-13 income_tax regs -which sets forth the record- keeping rules for money contributions-contains the relevant rules for determining whether unreimbursed volunteer expenses are deductible these rules and not the rules for non-money contributions apply to unreimbursed volunteer expenses for several reasons first the substantiation requirements for expenses of dollar_figure or more which are found in sec_1_170a-13 income_tax regs implicitly cat- egorize unreimbursed expenses as cash contributions by sub- jecting them to the requirements of sec_1_170a-13 income_tax regs second unreimbursed expenses are similar to money contributions because taxpayers who serve as volunteers usually use money to purchase goods or serv- ices third if the rules for non-money contributions in sec_1_170a-13 income_tax regs were interpreted to govern unreimbursed volunteer expenses they would require in cavalaris v commissioner tcmemo_1996_308 we cited sec_1_170a-13 income_tax regs without further analysis in considering the deductibility of unreimbursed volunteer expenses for contributions of dollar_figure or more sec_1_170a-13 income_tax regs requires the tax- payer to acquire and maintain the charity’s written acknowledgment of the contribution such an acknowledgment must include the amount of any cash the taxpayer paid and a description but not necessarily the value of any property other than cash the taxpayer transferred to the donee organization sec_1_170a-13 income_tax regs however for taxpayers who incur unreimbursed expenditures incident to the rendition of charitable services sec_1_170a-13 income_tax regs provides that the required acknowledgment need only include a description of the services provided by the taxpayer so long as the taxpayer has adequate_records under sec_1_170a-13 income_tax regs to substantiate the amount of the expenditures the irs treats unreimbursed volunteer expenses as cash contributions in instructing tax- payers how to complete their returns the irs instructions for form_8283 noncash charitable_contributions instruct taxpayers not to use the form for out-of-pocket volunteer expenses in- stead the instructions tell taxpayers to treat out-of-pocket expenses as cash contributions irs instructions however generally carry no authoritative weight see 126_tc_205 ndollar_figure affd 492_f3d_618 5th cir zimmerman v commissioner 71_tc_367 affd without published opinion 614_f2d_1294 2d cir verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila united_states tax_court reports information that would not be helpful in a subsequent audit or litigation about the propriety of a charitable-contribution deduction see 100_tc_32 the reporting requirements of sec_1_170a-13 income_tax regs are helpful to the irs in the processing and auditing of returns on which charitable deductions are claimed the rules for non-money contributions require a taxpayer who lacks a donee receipt to keep written records of the value of the property the cost of the property any previous contributions by the taxpayer of a partial interest in the contributed_property and any restrictions the taxpayer has placed on the use of the property sec_1_170a-13 income_tax regs these facts are generally irrelevant to the deductibility of unreimbursed vol- unteer expenses such expenses involve a monetary payment by the taxpayer for which the taxpayer seeks a deduction equal to the monetary outlay we conclude that the record- keeping requirements for money contributions in sec_1_170a-13 income_tax regs govern van dusen’s foster- cat expenses if a taxpayer contributing non-money property has a receipt from the donee organization the receipt need only contain i the name of the donee ii the date and location of the con- tribution and iii a description of the property in detail reasonably sufficient under the cir- cumstances sec_1_170a-13 income_tax regs the receipt need not contain certain infor- mation listed above that is required by sec_1_170a-13 income_tax regs because van dusen lacks a donee receipt we use the rules for non-money contributions without a receipt as the point of comparison we recognize that the recordkeeping rules for money contributions are also not well suited to unreimbursed volunteer expenses the rules for money contributions provide that records showing the name of the donee are acceptable substitutes for canceled checks sec_1 170a- a iii income_tax regs this reflects the assumption that records showing the name of the donee provide the same information as canceled checks this assumption is correct for money contributions because a canceled check reflects the name of the donee but for unreim- bursed volunteer expenses a canceled check reflects the name of the payee not the donee thus a record of the name of the donee would not reflect the same information as a canceled check van dusen’s documents do not indicate the name of the donee we hold that the recordkeeping requirements of sec_1_170a-13 income_tax regs govern unreimbursed volunteer expenses of less than dollar_figure in order to avoid the implausible result that such expenses would be free from recordkeeping requirements of the two provisions that could govern unreimbursed volunteer expenses of less than dollar_figure we believe sec_1_170a-13 income_tax regs is more suitable for the reasons stated in the text verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila van dusen v commissioner b van dusen’s documentation meets the recordkeeping requirements of sec_1_170a-13 income_tax regs sec_1_170a-13 income_tax regs requires the taxpayer to maintain one of the following i a cancelled sic check ii a receipt from the donee charitable_organization showing the name of the donee the date of the contribution and the amount of the contribu- tion a letter or other communication from the donee charitable organiza- tion acknowledging receipt of a contribution and showing the date and amount of the contribution constitutes a receipt iii in the absence of a canceled check or receipt from the donee chari- table organization other reliable written records showing the name of the donee the date of the contribution and the amount of the contribution in determining whether van dusen has substantiated her payments for veterinary services pet supplies cleaning sup- plies and utilities we look to the following records that van dusen introduced into evidence check copies bank account statements credit card statements a thornhill pet hospital client account history a costco purchase history pacific gas electric invoices a waste management payment history and an east bay municipal utility district billing history we find that van dusen’s records are sufficient to substan- tiate all her foster-cat expenses of less than dollar_figure van dusen’s documents are not canceled check sec_34 or receipts from the donee charitable_organization fix our ferals nor are her documents other reliable written records which are defined by sec_1_170a-13 income_tax regs as records that show the name of the donee the date of the contribution and the amount of the contribution van dusen’s documents do not show the name of the donee which is fix our ferals instead they show the names of the entities she paid van dusen’s documents do see supra note for an explanation of why we refer to the documents as check copies we assume all of these documents have been properly maintained within the meaning of sec_1_170a-13 income_tax regs the irs does not argue that the maintain require- ment means van dusen had to keep records continuously from the time she incurred the ex- penses rather the irs contends that van dusen’s documents do not satisfy the substantiation requirements regardless of how long they were kept a canceled check is a check bearing a notation that it has been paid_by the bank on which it was drawn black’s law dictionary 9th ed van dusen’s check copies bear no such notation and thus are not canceled checks rather they are photocopies of carbon copies of the original checks see supra note verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila united_states tax_court reports not show the amounts of her contributions to fix our ferals instead they show the amounts of her cat-care expenses which invariably have a nondeductible component because some of her cats were pet cats thus van dusen’s documents do not strictly comply with sec_1_170a-13 income_tax regs nonetheless we find that van dusen has substantially complied with sec_1_170a-13 income_tax regs we analogize van dusen’s situation to that of the taxpayer in 100_tc_32 in bond a tax- payer donated two blimps to a charitable_organization id pincite sec_1_170a-13 income_tax regs required him to obtain a document appraising the two blimps id pincite the regulation required that the appraisal document contain specific items of information id the taxpayer failed to obtain a separate written appraisal id pincite however the taxpayer attached a form_8283 noncash charitable_contributions on which an appraiser had recorded informa- tion about the value of the two blimps id bond distinguished between a regulatory requirement relating to the substance or essence of the statute strict adherence to which is mandatory and a requirement that is merely procedural or directory which may be satisfied by substantial compliance id pincite bond held that the reporting requirements of sec_1_170a-13 income_tax regs are directory and require only substantial compliance id the court further held that because substantially_all of the information required in an appraisal document was recorded on the form_8283 the taxpayer had complied with the regulatory requirement to obtain an appraisal document id pincite returning to van dusen the relevant regulatory require- ment is sec_1_170a-13 income_tax regs which allows a taxpayer to rely on canceled checks to record con- tributions of money under bond van dusen’s documents are legitimate substitutes for canceled checks van dusen produced records of her expenses which contained all of the information that would have been on a canceled check her records show the name of the payee the date of the payment and the amount of the payment a canceled check by a vol- unteer generally reflects the name of the payee but it does not reflect the name of the charitable_organization to which verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila van dusen v commissioner the volunteer’s services are rendered it might be useful for the volunteer to keep records of the name of the charitable_organization but it is not our role to impose such a require- ment in the absence of a specific regulatory requirement therefore van dusen has substantially complied with sec_1_170a-13 income_tax regs an objection might be raised that the substantial compli- ance doctrine should not apply to van dusen because sec_1_170a-13 income_tax regs specifies what records are valid substitutes for canceled checks the regulation states that the taxpayer can maintain a canceled check a receipt from the donee or in the absence of a canceled check or receipt from the donee charitable_organization other reliable written records showing the name of the donee the date of the contribution and the amount of the contribution id in specifying what documents are valid substitutes for canceled checks though the regulation was plainly not written with unreimbursed volunteer expenses in mind it requires sub- stitute records to reflect the name of the donee even though canceled checks for unreimbursed volunteer expenses would reflect the name of the payee it requires substitute records to reflect the amount of the contribution even though can- celed checks for unreimbursed volunteer expenses often reflect a nondeductible component van dusen’s documents fail to qualify as other reliable written records only because the regulation was not written with unreimbursed volunteer expenses in mind this failure should not preclude the application of the substantial compliance doctrine in bond as noted above sec_1_170a-13 income_tax regs partially incorporates the require- ments of sec_1_170a-13 income_tax regs for unreimbursed volunteer expenses of dollar_figure or more see supra note in what appears to be an attempt to correct the inadequacies of sec_1_170a-13 income_tax regs as a recordkeeping requirement for unreimbursed volunteer ex- penses sec_1_170a-13 income_tax regs specifies that sec_1_170a-13 income_tax regs need be satisfied only to the extent necessary to substantiate the amount of the expendi- tures emphasis added o ther reliable written records must by definition also be reliable their reliability is determined by the circumstances including whether the records were contemporaneous and whether the records were regularly kept sec_1_170a-13 income_tax regs further- more the information required by sec_1_170a-13 income_tax regs the other reliable written records provision must be stated on the taxpayer’s return if required by the return form or its instructions sec_1_170a-13 income_tax regs van dusen’s records satisfy the reliability requirement of sec_1_170a-13 income_tax regs the documents were made contemporaneously and in the course of regular recordkeeping the check copies faithfully duplicate the original checks which van dusen wrote in van dusen’s credit card company van dusen’s bank and pacific gas electric issued her state- ments in based on electronic compilations of transactions at the time similarly thornhill continued verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila united_states tax_court reports we conclude that van dusen has substantiated all the vet- erinary pet supply cleaning supply and utility expenses of less than dollar_figure as discussed earlier these expenses must be adjusted to exclude amounts not attributable to foster-cat care after such adjustments are made van dusen can deduct percent of her less-than-dollar_figure veterinary and pet supply expenses and percent of her less-than-dollar_figure cleaning supply and utility expenses van dusen has not met the substantiation require- ments for her foster-cat expenses of dollar_figure or more to claim a charitable-contribution deduction of dollar_figure or more the taxpayer must substantiate the contribution with a contemporaneous written acknowledgment from the donee organization sec_170 sec_1_170a-13 income_tax regs a taxpayer who incurs unreimbursed expenses incident to the rendition of services is treated as having obtained a contemporaneous written acknowledgment if the taxpayer has adequate_records under sec_1_170a-13 income_tax regs to substantiate the amount of the expenditures and acquires a contemporaneous statement from the donee organization containing a a description of the services provided by the taxpayer b a statement of whether or not the donee organization provides any goods or services in consideration in whole or in part for the unreim- bursed expenditures and c a description and good_faith estimate of the value of any goods or services provided by the donee organization sec_1_170a-13 income_tax regs for the statement to be contemporaneous the taxpayer must obtain the donee’s statement on or before the earlier of pet hospital costco waste management and east bay municipal utility district recorded van dusen’s payments in their computer systems in and later retrieved the data in response to her customer service inquiries van dusen’s tax_return did not need to disclose any information required by sec_1 170a- a iii income_tax regs although van dusen submitted form_8283 which requires the name of the donee the date of the contribution and the amount of the contribution-informa- tion required under sec_1_170a-13 income_tax regs -van dusen did not need to file this form the instructions for form_8283 explicitly state that it does not apply to out-of-pocket expenses_incurred for volunteer work although irs form instructions are generally not bind- ing see supra note we cite the form instructions here because sec_1_170a-13 in- come tax regs directs the taxpayer to furnish the information required by sec_1 170a- a iii income_tax regs on the taxpayer’s return if required by the return form or its instructions on her tax_return van dusen simply had to enter the total amount of her mone- tary contributions including out-of-pocket expenses -which she did verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila van dusen v commissioner the date the return was filed or the due_date including extensions for filing the return sec_1_170a-13 income_tax regs van dusen has not satisfied the contemporaneous written acknowledgment requirement the due_date for filing her return was date and she filed her return on date the earlier of the two dates is date the date by which van dusen was required to obtain the donee’s statement is therefore date van dusen had not obtained any written acknowledgment of her services from fix our ferals by date even by trial she had failed to obtain from fix our ferals a statement with the information required by sec_1_170a-13 income_tax regs since van dusen lacks the appropriate written acknowl- edgment from fix our ferals she has not substantiated and cannot deduct any foster-cat expenses of dollar_figure or more neither party however has identified which portions of the claimed deduction are attributable to foster-cat expenses of dollar_figure or more it seems to us that the proper identification procedure is to multiply each cat-care expense by the rel- evant percentage percent or percent and see whether the resulting amount equals or exceeds dollar_figure any amount less than dollar_figure is deductible and any amount that is dollar_figure or the regulations do not specifically require the taxpayer to attach the contemporaneous writ- ten acknowledgment to the tax_return sec_1_170a-13 income_tax regs specifies the particular information required to be on the donee statement van dusen attempted to submit a letter written by the fix our ferals treasurer in as proof of contemporaneous written acknowledgment see ex 3-p at trial we sustained the irs’s hearsay objection to the letter van dusen filed a motion for recon- sideration of the evidentiary ruling we denied the motion the letter does not qualify for any hearsay exception and regardless it fails to meet the requirements of sec_1_170a-13 income_tax regs in 39_f2d_540 2d cir the court_of_appeals for the second circuit held that if the taxpayer has proven deductible expenses but the precise amount remains uncertain courts can estimate the amount of such expenses the cohan_rule does not allow van dusen to deduct any foster-cat expenses of dollar_figure or more sec_170 and sec_1_170a-13 income_tax regs impose specific substantiation requirements on charitable_contributions of dollar_figure or more the cohan_rule does not relieve taxpayers of substantiation re- quirements that congress has specifically laid out see 118_tc_528 denying charitable_contribution_deduction because taxpayer’s contemporaneous writ- ten acknowledgment did not comply with sec_170 affd 374_f3d_881 9th cir stussy v commissioner tcmemo_2003_232 disallowing deductions for residential expenses for the portions of a house used by charity because taxpayer failed to provide contemporaneous written acknowledgment see also 50_tc_823 cohan_rule inapplicable when taxpayer has not satisfied sec_274 substantiation require- ments affd per curiam 412_f2d_201 2d cir verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila united_states tax_court reports more is not deductible by our calculations the following foster-cat expenses are dollar_figure or more payee date1 document thornhill pet hospital thornhill pet hospital cli- thornhill pet hospital pet vet pet food st louis vet clinic pet vet pet food st louis vet clinic thornhill pet hospital pet vet pet food berkeley dog and cat hospital ent account history bank statement2 credit card statement credit card statement check no check no credit card statement2 check no bank statement thornhill pet hospital credit card statement2 amount listed on document amount consti- tuting a foster-cat expense dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure 1for credit card statements dates refer to the transaction date not the posting date 2also reflected on the thornhill pet hospital client account history each of the remaining foster-cat expenses is less than dollar_figure v effect of sec_280a sec_280a provides that for individual taxpayers no deduction otherwise allowable under this chapter shall be allowed with respect to the use of a dwelling_unit which is used by the taxpayer during the taxable_year as a residence sec_280a contains an exception to sec_280a it provides subsection a shall not apply to any deduction allowable to the taxpayer without regard to its connection with his trade_or_business or with his income-producing activity the irs argues that sec_280a forbids van dusen from claiming a charitable-contribution deduction for a portion of her household utility bills we hold that sec_280a does not affect the deductibility of van dusen’s expenses van dusen’s expenses would be deductible without regard to any connection with a trade_or_business see sec_280a van dusen’s trade_or_business was legal services she worked as an attorney and derived all her income from legal jobs she derived no income or expectation of income on the basis of van dusen’s credit card statement we find that the dollar_figure payment to bay area veterinary specialist on date was offset by a credit of dollar_figure that was post- ed on date since van dusen’s total_payment to bay area veterinary specialist was dollar_figure dollar_figure - dollar_figure the amount of her foster-cat expense was dollar_figure percent of dollar_figure therefore we categorize this expense as less than dollar_figure verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila van dusen v commissioner from fostering cats therefore the utility bills are covered by the exception in sec_280a vi dollar_figure check to island cat resources and adoption van dusen’s documentation includes a dollar_figure check to icra island cat resources and adoption with fundraiser in the memo line island cat resources and adoption is a sec_170 organization see supra note and accom- panying text we hold that dollar_figure is deductible as a charitable_contribution to island cat resources and adoption van dusen testified that the check was a donation to the chari- table organization and her documentation meets the record- keeping requirements of sec_1_170a-13 income_tax regs to reflect the foregoing decision will be entered under rule f verdate 0ct date jkt po frm fmt sfmt v files vandusen sheila


internal_revenue_service number release date index number ----------------------------- -------------------------- ------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no -------------- telephone number ---------------------- refer reply to cc psi plr-110338-16 date date trust a b c date date year state court -------------------------------------------------------------------------------------------- ----------------------------------- -------------------------------------------------------------------------------------------- ------------------------------ -------------------------------------------------------------------------------------------- ----------------------------------- -------------------------------------------------------------------------------------------- --------------------------------------- ---------------------------- ------------------ ------- ---------- ---------------------------------------------------------------------- dear ------------------- this responds to your authorized representative’s letter dated date in which you requested rulings regarding a proposed division of a charitable_remainder_trust plr-110338-16 the facts submitted and the representations made are as follows a established trust on date b is a’s wife c is the trustee of trust a b and c represent that trust qualifies as a charitable_remainder_unitrust crut described in sec_664 of the internal_revenue_code the code while a and b took a deduction under sec_170 of the code at the time trust was established trust represents that no deduction was allowed under sec_170 sec_642 sec_2055 or sec_2522 with respect to the income_interest of any lifetime beneficiary a and b were married prior to date and thereafter during their marriage a and b have been residents of state a and b agreed to divorce and have filed in court a petition and cross-petition for dissolution of their marriage on date a and b incident to the divorce proceedings executed a written_agreement in settlement of their respective marital property rights the agreement under the agreement a and b agreed to delay entry of the final judgment of divorce until receipt of a private_letter_ruling from the irs a and b anticipate securing the final decree of divorce from court in year as part of their marriage dissolution proceedings a and b contemplate dividing trust into two new charitable_remainder unitrusts trust a and trust b a and b will execute a property settlement agreement which will specify the percentage division of trust between trust a and trust b as a result of the division of trust assets trust a and trust b will hold a pro_rata share of each asset of trust’s corpus a anticipates paying all expenses incident to the division of trust the general terms of trust a and trust b will be the same as those of trust with the following exceptions a and b will each possess no interest in the other’s charitable_remainder_unitrust on a’s death all the remaining assets in trust a will be distributed to the charitable beneficiaries designated by him and upon b’s death all remaining assets in trust b will be distributed to the charitable beneficiaries designated by her a and b will each be the sole non-charitable beneficiary of trust a and trust b respectively and a and b will receive their unitrust payments from their respective trusts trust a and b have requested rulings on the effect of trust’s division into trust a and trust b law and analysis ruling sec_664 provides generally that a charitable_remainder_unitrust shall be exempt from federal_income_tax plr-110338-16 sec_664 provides that a charitable_remainder_unitrust is a_trust a from which a fixed percentage which is not less than percent nor more than percent of the net fair_market_value of its assets valued annually is to be paid not less often than annually to one or more persons at least one of which is not an organization described in sec_170 and in the case of individuals only to an individual who is living at the time of the creation of the trust for a term of years not in excess of years or for the life or lives of such individual or individuals b from which no amount other than the payments described in sec_664 and other than qualified gratuitous transfers described in sec_664 may be paid to or for_the_use_of any person other than an organization described in sec_170 c following the termination of the payments described in sec_664 the remainder_interest in the trust is to be transferred to or for_the_use_of an organization described in sec_170 or is to be retained by the trust for such a use or to the extent the remainder_interest is in qualified_employer_securities as defined in sec_664 all or part of such securities are to be transferred to an employee_stock_ownership_plan as defined in sec_4975 in a qualified_gratuitous_transfer as defined by sec_664 and d with respect to each contribution of property to the trust the value determined under sec_7520 of such remainder_interest in such property is at least percent of the net fair_market_value of such property as of the date such property is contributed to the trust based solely on the facts and the representations submitted that each of trust trust a and trust b meet the requirements of sec_664 the division of trust into trust a and trust b will not cause either trust trust a or trust b to fail to qualify as charitable_remainder trusts under sec_664 ruling sec_61 and of the internal_revenue_code provides that gross_income includes gains derived from dealings in property and income from an interest in a_trust sec_1001 provides that the gain from the sale_or_other_disposition of property is the excess of the amount_realized from the disposition over the adjusted_basis provided in sec_1011 for determining gain and the loss is the excess of the adjusted_basis provided in sec_1011 for determining loss over the amount_realized sec_1001 states that the amount_realized from the sale_or_other_disposition of property is the sum of any money received plus the fair_market_value of the property other than money received under sec_1001 except as otherwise provided in subtitle a the entire amount of gain_or_loss determined under sec_1001 on the sale_or_exchange of property must be recognized sec_1_1001-1 of the income_tax regulations provides that the gain_or_loss realized from the conversion of property into cash or from the exchange of property for plr-110338-16 other_property differing materially either in_kind or in extent is treated as income or loss sustained a partition of jointly owned property is not a sale_or_other_disposition of property where the co-owners of the joint property sever their joint_interests but do not acquire a new or additional interest as a result of the partition thus neither gain nor loss is realized on a partition see revrul_56_437 1956_2_cb_507 conversion of a joint_tenancy in stock to a tenancy_in_common in order to eliminate the survivorship feature and the partition of a joint_tenancy in stock are not sales or exchanges similarly divisions of trusts are also not sales or exchanges of trust interests where each asset is divided pro_rata among the new trusts see revrul_69_486 1969_2_cb_159 pro_rata distribution of trust assets not a sale_or_exchange here the division of trust into trust a and trust b will not result in any shift in beneficial_interest in the assets of trust accordingly the division of trust as described will not result in the realization of gain_or_loss under sec_61 and sec_1001 in addition because the division of trust is not a taxable_event under sec_1001 the holding_period of the assets that trust a and trust b receive from trust will include the period that trust held those assets ruling sec_1041 provides that no gain_or_loss will be recognized on a transfer of property from an individual to or in trust for the benefit of a spouse or former spouse if the transfer is incident to the divorce under sec_1041 for the purposes of subtitle a of the internal_revenue_code the transferee is treated as having acquired the property by gift from the transferor with a carryover_basis from the transferor under sec_1041 the transfer of property is incident to the divorce if the transfer occurs within one year after the date the marriage ceases or is related to the cessation of the marriage sec_1 1041-lt b q a-7 of the income_tax regulations provides that a transfer of property is related to the cessation of the marriage if the transfer is pursuant to a divorce_or_separation_instrument as defined in sec_71 b and the transfer occurs not more than six years after the date on which the marriage ceases sec_1223 provides that a taxpayer’s holding_period for acquired property includes the period the property was held by any other person if under chapter one of the code the property has for the purpose of determining gain_or_loss from a sale_or_exchange the same basis in whole or in part in the taxpayer’s hands as it would have in the hands of the other person in the present case the partition of trust into trust a and trust b is a transfer by a of a portion of his interest in trust to b incident to their divorce therefore under sec_1041 neither a nor b has gain_or_loss on the division of trust into trust a and plr-110338-16 trust b in addition under sec_1041 b’s basis in trust b will be a pro_rata portion of a’s basis in trust as a result b’s holding_period in trust b will include a’s holding_period in trust a’s basis in trust a will be a pro_rata portion of his basis in trust ruling sec_2501 imposes a gift_tax for each calendar_year on the transfer of property by gift during the calendar_year sec_2511 provides that the gift_tax applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_2512 provides that where property is transferred for less than an adequate_and_full_consideration in money_or_money's_worth then the amount by which the value of the property exceeded the value of the consideration shall be deemed a gift and shall be included in computing the amount of gifts made during the calendar_year sec_25_2512-8 of the gift_tax regulations provides in relevant part that a relinquishment or promised relinquishment of dower or curtesy or of a statutory estate created in lieu of dower or curtesy or other marital rights in the spouse’s property or estate shall not be considered to any extent a consideration in money or money’s worth however sec_25_2512-8 indicates that sec_2516 and the regulations thereunder provide specific rules with respect to certain transfers incident to a divorce sec_2516 provides in relevant part that where a husband and wife enter into a written_agreement relative to their marital and property rights and divorce occurs within the three-year period beginning on the date one year before such agreement is entered into whether or not such agreement is approved by the divorce decree any transfers of property or interests in property made pursuant to such agreement to either spouse in settlement of his or her marital or property rights shall be deemed to be transfers made for a full and adequate_consideration in money or money’s worth sec_25_2516-1 provides that transfers of property or interests in property made under the terms of a written_agreement between spouses in settlement of their marital or property rights are deemed to be for an adequate_and_full_consideration in money_or_money's_worth whether or not the agreement is approved by a divorce decree if the spouses obtain a final decree of divorce from each other within two years after entering the agreement in this case a and b entered into the written property settlement agreement on date a and b expect a final divorce decree to be entered the same year provided a’s and b’s divorce occurs within two years of date we rule that the division of trust and the plr-110338-16 pro_rata distribution of trust’s assets to trust a and trust b will be treated as transfers made for full and adequate_consideration in money or money’s worth and therefore will not be subject_to gift_tax under sec_2501 ruling sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2033 provides that the value of the gross_estate shall include the value of all property to the extent of the interest therein of the decedent at the time of his death sec_2036 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for an adequate_and_full_consideration in money or money’s worth by trust or otherwise under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death the possession or enjoyment of or the right to the income from the property or the right either alone or in conjunction with any person to designate the persons who shall possess or enjoy the property or the income therefrom sec_20_2036-1 of the estate_tax regulations provides that if the decedent retained or reserved an interest or right with respect to all of the property transferred by him the amount to be included in his gross_estate under sec_2036 is the value of the entire property less only the value of any outstanding income_interest which is not subject_to the decedent’s interest or right and which is actually being enjoyed by another person at the time of the decedent’s death if the decedent retained or reserved an interest or right with respect to only a part of the property transferred by him the amount to be included in his gross_estate under sec_2036 is only a corresponding proportion of the amount described in the preceding sentence sec_2055 provides for purposes of the tax imposed by sec_2001 the value of the taxable_estate shall be determined by deducting from the value of the gross_estate the amount of all transfers for charitable purposes sec_20_2055-1 provides that a deduction is allowed under sec_2055 from the gross_estate of a decedent who was a citizen or resident_of_the_united_states at the time of his death for the value of property included in the decedent’s gross_estate and transferred by the decedent during his lifetime or by will for charitable purposes sec_2055 provides in relevant part that where an interest in property other than an interest described in sec_170 passes or has passed_from_the_decedent to a person or for a use described in sec_2055 and an interest other than an interest plr-110338-16 which is extinguished upon the decedent’s death in the same property passes or has passed for less than an adequate_and_full_consideration in money or money’s worth from the decedent to a person or for a use not described in sec_2055 no deduction shall be allowed under sec_2055 for the interest which passes or has passed to the person or for the use described in sec_2055 unless in the case of a remainder_interest such interest is in a_trust which is a charitable_remainder_annuity_trust or a charitable_remainder_unitrust described in sec_664 or a pooled_income_fund described in sec_642 in this case a and b entered into the agreement incident to their anticipated divorce which we assume for purposes of this ruling will occur within the time period specified in sec_2516 pursuant to the agreement each party has given up certain property rights and interests in exchange for the release by the other party of property rights and interests a and b have effectively agreed upon what percentage of the value of trust resulted from the contribution of each and as a result upon what percentage each party is entitled to after divorce accordingly we conclude that for purposes of sec_2036 a will be treated as having transferred the property distributed from trust to the new charitable_remainder_unitrust of which a is the non-charitable beneficiary and b will be treated as transferring the property distributed from trust to the new charitable_remainder_unitrust of which b is the non-charitable beneficiary a and b each retained the right to receive unitrust payments for life from his or her respective trust as well as the lifetime power over his or her respective trust to substitute the charitable beneficiaries designated in the trust instrument with one or more other charitable organizations described in sec_170 sec_170 sec_642 sec_2055 and sec_2522 with respect to a we rule that upon a’s death if a retains the right to receive unitrust payments for life and the power to substitute the charitable beneficiaries of trust a the value of the assets of trust a will be included in a’s gross_estate under sec_2036 further we rule that a’s estate will be entitled to an estate_tax charitable deduction under sec_2055 for the value of the assets of trust a that will pass upon a’s death to the charitable beneficiaries designated by a with respect to b we rule that upon b’s death if b retains the right to receive unitrust payments for life and the power to substitute the charitable beneficiaries designated of trust b the value of the assets of trust b will be included in b’s gross_estate under sec_2036 further we rule that b’s estate will be entitled to an estate_tax charitable deduction under sec_2055 for the value of the assets of trust b that will pass upon b’s death to the charitable beneficiaries of designated by b rulings and plr-110338-16 sec_507 provides that except as provided in sec_507 a private_foundation may terminate its private_foundation_status only if the private_foundation notifies the secretary of its intent to terminate its status as a private_foundation or it is involuntarily terminated by the secretary due repeated acts or a willful and flagrant act giving rise to chapter liability sec_507 provides that in the case of the transfer of assets of any private_foundation to another private_foundation pursuant to any liquidation merger redemption recapitalization or other adjustment organization or reorganization the transferee foundation shall not be treated as a newly created organization sec_507 imposes an excise_tax on any private_foundation which voluntarily terminates its private_foundation_status under sec_507 sec_507 provides that the term substantial_contributor means any person who contributed or bequeathed an aggregate amount of more than dollar_figure to the private_foundation if such amount is more than percent of the total contributions and bequests received by the foundation before the close of the taxable_year of the foundation in which the contribution or bequest is received by the foundation from such person in the case of a_trust the term substantial_contributor also means the creator of the trust sec_4941 provides that the term self-dealing includes any direct or indirect sale_or_exchange or leasing between a private_foundation and a disqualified_person sec_4941 provides that the term self-dealing includes any direct or indirect transfer to or use by or for the benefit of a disqualified_person of the income or assets of a private_foundation sec_4945 imposes an excise_tax on each taxable_expenditure described in sec_4945 made by a private_foundation sec_4945 defines the term taxable_expenditure to include amounts paid_or_incurred by a private_foundation for certain activities for a purpose other than one specified in sec_170 or as a grant to certain organizations unless the private_foundation exercises expenditure_responsibility with respect to such a grant sec_4945 provides that a taxable_expenditure includes any amount_paid or incurred by a private_foundation as a grant to an organization unless the private_foundation exercises expenditure_responsibility with respect to such grant in accordance with sec_4945 sec_4946 b and d defines the term disqualified_person with respect to a private_foundation as including among others a substantial_contributor to the private plr-110338-16 foundation including the creator of a_trust a foundation_manager including a trustee and a member_of_the_family of a substantial_contributor or foundation_manager sec_4946 provides that substantial_contributor is defined as the term is described in sec_507 sec_4947 provides that for a split interest charitable_trust sec_507 sec_508 sec_4941 sec_4943 sec_4944 and sec_4945 apply as if such trust were a private_foundation sec_4947 provides that the provisions of sec_4947 do not apply to any amounts payable under the terms of a split interest charitable_trust to income beneficiaries unless a deduction was allowed under sec_170 sec_642 sec_2055 or sec_2522 sec_1_507-1 provides in part that if a private_foundation transfers all or part of its assets to one or more other private_foundations pursuant to a transfer described in sec_507 and sec_1_507-3 such transferor foundation will not have terminated its private_foundation_status under sec_507 sec_1_507-3 provides in general that in the event of a transfer of assets described in sec_507 any person who is a substantial_contributor within the meaning of sec_507 with respect to the transferor foundation shall be treated as a substantial_contributor with respect to the transferee foundation sec_1_507-3 provides in part that except as provided in sec_1 a if the transferor has disposed of all of its assets then during any period in which the transferor has no assets sec_4945 and h shall not apply to the transferee or the transferor with respect to any expenditure_responsibility grants by the transferor sec_1_507-3 provides that if a private_foundation transfers all of its assets to one or more private_foundations which are effectively controlled directly or indirectly by the same person or persons which effectively controlled the transferor private_foundation for purposes of chapter sec_4940 et seq and part ii of subchapter_f of chapter of the code sec_507 through such a transferee private_foundation shall be treated as if it were the transferor private_foundation sec_1_507-3 in pertinent part that as used in sec_507 the terms other adjustment organization or reorganization include any partial_liquidation or any other significant disposition of assets to one or more private_foundations other than transfers for full and adequate_consideration or distributions out of current income sec_1_507-3 provides that the term significant disposition of assets means the transfer of twenty-five percent or more of the fair_market_value of the plr-110338-16 net assets of the foundation at the beginning of the taxable_year which disposition may be made in a single year or in a series of related dispositions over more than one year sec_1_507-3 provides that unless a private_foundation voluntarily gives notice pursuant to sec_507 a transfer of assets described in sec_507 will not constitute a termination of the transferor’s private_foundation_status under sec_507 sec_53_4945-5 of the foundation regulations confirms that sec_1 a a ii f and a govern the extent to which the expenditure_responsibility_rules contained in sec_4945 and h apply to transfers of assets described in sec_507 sec_53_4945-6 provides that expenditures_for unreasonable administrative expenses including compensation consultant fees and other fees for services will ordinarily be taxable_expenditures under sec_4945 sec_53_4945-6 states that a transfer of assets described in sec_1 c of the regulations applies only to organizations described in sec_501 or treated as so described under sec_4947 sec_53_4947-1 provides that a split-interest trust is subject_to the provisions of sec_507 except as provided in sec_53_4947-1 e to the extent applicable to a split-interest trust except as provided in sec_4947 except as provided in sec_4947 and of the code in the same manner as if such trust were a private_foundation sec_53_4947-1 of the foundation regulations provides that under sec_4947 sec_4941 does not apply to any amounts payable under the terms of a split interest trust to income beneficiaries unless a deduction was allowed under f b c e b or c b with respect to the income_interest of any such beneficiary revrul_2002_28 2002_20_irb_941 provides in part that once a private_foundation distributes all of its assets to one or more other effectively controlled private_foundations under a plan of dissolution the obligation to exercise expenditure_responsibility under sec_4945 with respect to the transfers made by the transferor foundation passes from that foundation to the transferee foundation s revrul_2008_41 2008_30_irb_170 provides guidance regarding sec_507 sec_4941 sec_4945 and sec_4947 when a charitable_remainder_trust is divided into two or more separate and equal charitable_remainder trusts ruling plr-110338-16 as a split-interest trust trust is generally treated as if it were a private_foundation under sec_4947 thus except as provided in sec_4947 and sec_53_4947-1 of the foundation regulations it is subject_to the termination provisions of sec_507 as well as the provisions of sec_4941 and sec_4945 under sec_1_507-3 the proposed division of all of trust’s assets to trust a and trust b will constitute a significant disposition of trust’s assets because the transfer is greater than twenty-five percent of trust’s assets trust a and trust b will both be treated as private_foundations with respect to sec_507 pursuant to sec_4947 therefore the proposed transfers are described in sec_507 a division of assets described in sec_507 does not constitute a termination of the transferor’s private_foundation_status under sec_507 unless the transferor voluntarily gives notice pursuant to sec_507 since trust has not given notice of its intent to terminate it retains its private_foundation_status and the termination_tax imposed by sec_507 will not apply accordingly the division and distribution of trust assets into trust a and trust b does not terminate trust ‘s status under sec_507 as a_trust described in and subject_to the private_foundation provisions of sec_4947 and does not result in the imposition of an excise_tax under sec_507 ruling as a crut under sec_664 trust is a split-interest trust described in sec_4947 and treated as a private_foundation for purposes of sec_4941 sec_4941 imposes an excise_tax on acts of self-dealing a and b are disqualified persons with respect to trust under sec_4946 as substantial contributors to trust however the only interest a and b have in trust is the right to the payment of the unitrust_amount after division of trust the total unitrust_amount payment remains the same during the lives of a and b since the transferee cruts do not have survivorship provisions when a or b dies the remainder of each of their cruts is immediately distributed to qualified charities sec_4947 and sec_53_4947-1 provide that sec_4941 does not apply to any amounts payable under the terms of a split interest trust to income beneficiaries unless a deduction was allowed under sec_170 sec_642 sec_2055 or sec_2522 with respect to the income_interest of any such beneficiary based on the representation that no such deduction was allowed payments to a from trust a and to b from trust b as income beneficiaries will not be acts of self-dealing under sec_4941 ruling as a crut under sec_664 trust is a split-interest trust described in sec_4947 and treated as a private_foundation for purposes of sec_4945 thus an excise_tax is imposed on taxable_expenditures including any amount_paid or incurred by a private_foundation for a non-charitable purpose_trust a and trust b as charitable_remainder unitrusts under sec_664 are also treated as private_foundations for purposes of sec_4945 under the provisions of sec_4947 however pursuant to sec_4947 plr-110338-16 amounts payable to income beneficiaries under the terms of such a charitable_remainder_trust are not subject_to the provisions of sec_4945 unless a deduction was allowed for those amounts under sec_170 sec_2055 or sec_2522 based on the representation that no such deduction was allowed payments to a from trust a and to b from trust b as income beneficiaries will not be taxable_expenditures under sec_4945 trust will transfer all of its assets to trust a and trust b thus under revrul_2008_41 the transfer of trust’s assets are not expenditures that require expenditure_responsibility pursuant to sec_1_507-3 or sec_1_507-3 because trust has made no prior distributions for which expenditure_responsibility is required trust a and trust b assume no preexisting expenditure_responsibility from trust under sec_1_507-3 or sec_1_507-3 therefore the division of trust and the distribution of its assets to trust a and trust b do not constitute taxable_expenditures under sec_4945 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter furthermore the estate_tax rulings in this letter apply only to the extent that the relevant sections of the internal_revenue_code are in effect during the period at issue this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to trust’s authorized representative sincerely bradford poston senior counsel branch office of the associate chief_counsel passthroughs special industries cc


t c memo united_states tax_court wm jon mary lou mccormick petitioners v commissioner of internal revenue respondent docket no filed date wm jon mccormick and mary lou mccormick pro sese julia l wahl for respondent memorandum opinion cohen judge respondent determined a deficiency of dollar_figure in petitioners’ federal_income_tax for and an accuracy- related penalty of dollar_figure pursuant to sec_6662 unless otherwise indicated all section references are to the internal_revenue_code for the year in issue and all rule references are to the tax_court rules_of_practice and procedure after express concessions and abandoned issues the issue for decision is whether petitioners must recognize discharge_of_indebtedness income as a result of settlement of their accounts with citifinancial services and chase manhattan bank background this case was submitted fully stipulated under rule and the stipulated facts are incorporated as our findings by this reference petitioners resided in pennsylvania at the time the petition was filed william jon mccormick petitioner is an attorney from at least petitioners maintained a loan account with citifinancial services citifinancial prior to date petitioners were advised that the payoff amount of the loan was dollar_figure in a fax sent date to a branch manager petitioner challenged the payoff amount claiming that an insurance refund of dollar_figure should have been credited to the account the following day the manager offered to settle the dispute for a lump-sum payment of dollar_figure petitioner accepted and paid the dollar_figure citifinancial sent a form 1099-c cancellation of debt to the internal_revenue_service before date petitioner mary lou mccormick formerly mary lou howard had a credit card with chase manhattan bank chase the account was placed with collection agencies date and date petitioners disputed the account from at least date on date petitioner sent a letter to chase challenging the alleged account balance of dollar_figure and noting that the period of limitations on a suit to collect had expired petitioner offered to pay dollar_figure as the amount actually owed chase accepted and mailed petitioner mary lou mccormick a form 1099-c for dollar_figure the difference between the balance on the account and the payment discussion the issue remaining for decision is whether petitioners had cancellation_of_indebtedness_income from citifinancial and chase sec_61 includes in the general definition of gross_income income_from_discharge_of_indebtedness when the amount of a debt is disputed a subsequent settlement of the dispute would be treated as the amount of debt cognizable for tax purposes 916_f2d_110 3d cir holding that unenforceable debt is also disputed as to amount and its settlement does not give rise to cancellation_of_indebtedness_income revg 92_tc_1084 40_bta_1263 there must be evidence of a dispute a settlement standing alone does not prove that a good-faith dispute existed see rood v commissioner tcmemo_1996_248 affd without published opinion 122_f3d_1078 11th cir in a fax sent to citifinancial petitioner argued that the loan payoff amount of dollar_figure should be reduced by a dollar_figure insurance refund aside from the insurance refund petitioners do not argue that the payoff amount was incorrect in a letter sent to chase petitioner argued that the outstanding balance should be dollar_figure rather than the dollar_figure claimed by the bank bank records reflected that the account had been disputed from at least the preponderance_of_the_evidence supports a conclusion that a bona_fide dispute existed regarding the dollar_figure insurance refund on the citifinancial debt and the balance of the chase account over dollar_figure see eg earnshaw v commissioner tcmemo_2002_191 affd 150_fedappx_745 10th cir see also melvin v commissioner tcmemo_2009_199 to determine the amount of cancellation_of_indebtedness_income properly attributed to petitioners we must determine the amount of the citifinancial and chase debt that was definite and liquidated see zarin v commissioner supra pincite in this case respondent may not rely on the forms 1099-c submitted by citifinancial and chase as evidence of the amount of debt that was definite and liquidated sec_6201 provides that in any court_proceeding if a taxpayer asserts a reasonable dispute with respect to any item_of_income reported on an information_return and has fully cooperated the commissioner shall have the burden of producing reasonable and probative information concerning the deficiency in addition to the information_return petitioners have asserted reasonable disputes with respect to the amounts reported by citifinancial and chase respondent has failed to produce reasonable and probative information independent of the third-party information returns petitioners did not dispute the citifinancial claimed payoff amount of dollar_figure less the disputed insurance refund of dollar_figure a total of dollar_figure that amount is decreased by the settlement payment of dollar_figure we conclude that the amount of petitioners’ cancellation_of_indebtedness_income from citifinancial is dollar_figure petitioners had an uncontested and liquidated outstanding balance of dollar_figure with chase because they paid dollar_figure to settle the account they have no cancellation_of_indebtedness_income from chase in reaching our decision we have considered all arguments made by the parties to the extent not mentioned or addressed they are irrelevant or without merit for the reasons explained above decision will be entered under rule