Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 55-1

1955-1 C.B. 26

Sec. 170

IRS Headnote

A taxpayer pledges 30 percent of his adjusted gross income to an organized nonprofit charity fund-raising foundation and satisfies such pledge by delivering to the foundation two separate checks, one of which is in an amount equal to 10 percent of his adjusted gross income and drawn payable to a specific organization of the type designated in section 170(b)(1)(A) of the Internal Revenue Code of 1954. The foundation acts merely as transfer agent of this check and delivers it directly and unconditionally to the organization to whose order it is drawn. Held: the taxpayer is entitled to the special deduction for contributions in an amount not in excess of 10 percent of adjusted gross income provided under section 170(b)(1)(A) in addition to the deduction for contributions in an amount not in excess of 20 percent of adjusted gross income provided under section 170(b)(1)(B) of the Code. The foregoing has application under the circumstances stated only if the fund-raising foundation provides for such satisfaction of pledges and transfer of checks.

Full Text

Rev. Rul. 55-1

Advice has been requested whether a taxpayer who designates a portion of the satisfaction of a pledge, made to an organized nonprofit charity fund-raising foundation, in an amount equal to 10 percent of his adjusted gross income by means of a check drawn payable to a specific organization of a type specified in section 170(b)(1)(A) of the Internal Revenue Code of 1954, is entitled to the special deduction for contributions in an amount not in excess of 10 percent of adjusted gross income provided under such section 170(b)(1)(A) in addition to the deduction in an amount not in excess of 20 percent of adjusted gross income provided under section 170(b)(1)(B) of the Code.

An individual taxpayer pledges 30 percent of his adjusted gross income as a contribution to an organized nonprofit independent charity fund-raising foundation without designation as to which institution in the foundation budget is to receive the contribution when paid. In satisfaction of the pledge he delivers two checks to the foundation, one drawn in favor of the foundation in an amount equal to 20 percent of his adjusted gross income and the second check drawn to the order of a specific organization of the type designated in section 170(b)(1)(A) of the Code. The foundation accepts these checks in full settlement of the pledge. The second check, drawn to the order of the specific organization is delivered to that organization, directly and unconditionally, by the foundation. No charge is made for delivering the check. The foundation has always permitted a donor to designate a specific organization which is to receive his contribution.

Section 170 of the Code reads, in part, as follows:

(b) LIMITATIONS.-

(1) INDIVIDUALS.-In the case of an individual the deduction provided in subsection (a) shall be limited as provided in subparagraphs (A), (B), (C), and (D).

(A) Special Rule.-Any charitable contribution to-

(i) a church or a convention or association of churches,

(ii) an educational organization referred to in section 503(b)(2), or

(iii) a hospital referred to in section 503(b)(5), shall be allowed to the extent that the aggregate of such contributions does not exceed 10 percent of the taxpayer's adjusted gross income computed without regard to any net operating loss carryback to the taxable year under section 172.

(B) General Limitation.-The total deductions under subsection (a) for any taxable year shall not exceed 20 percent of the taxpayer's adjusted gross income computed without regard to any net operating loss carryback to the taxable year under section 172. For purposes of this subparagraph, the deduction under subsection (a) shall be computed without regard to any deduction allowed under subparagraph (A) but shall take into account any charitable contributions to the organizations described in clauses (i), (ii), and (iii) which are in excess of the amount allowable as a deduction under subparagraph (A). Section 503(b) of the Code reads, in part, as follows:

(2) an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on;

(5) an organization the principal purposes or functions of which are the providing of medical or hospital care or medical education or medical research or agricultural research.

Thus, a deduction is allowed in an amount not in excess of 10 percent of adjusted gross income for contributions paid to an organization of the type specified in section 170(b)(1)(A) of the Code. Where contributions of such nature are made to an extent greater than 10 percent of adjusted gross income the excess over 10 percent will be allowed together with other charitable contributions to an extent not in excess of 20 percent of adjusted gross income under section 170(b)(1)(B) of the Code.

Accordingly, it is held that the taxpayer, under the foregoing circumstances, is entitled to the special deduction for contributions in an amount not in excess of 10 percent of adjusted gross income provided under section 170(b)(1)(A) in addition to the deduction for contributions in an amount not in excess of 20 percent of adjusted gross income provided under section 170(b)(1)(B) of the Code. The foregoing has application under the circumstances stated only if the fund-raising foundation provides for such satisfaction of pledges and transfer of checks.

Claims for deductions subject to the special limitation of section 170(b)(1)(A) of the Code must be substantiated, when required by the Commissioner, by a statement from the organization to which the contribution or gift was made showing whether the organization is of the type referred to in such section 170(b)(1)(A), the name and address of the contributor or donor, the amount of the contribution or gift and the date of the actual payment thereof, and by such other information as the Commissioner may deem necessary.