Our business donation must be refunded if a charity cancels its project. Is the deduction complete now?
A transferred payment subject to a meaningful condition or right of return is not automatically a completed deductible charitable gift.
By AE Tax Advisors Team · Updated October 29, 2026
A transferred payment subject to a meaningful condition or right of return is not automatically a completed deductible charitable gift. The applicable conditional-gift rules consider the terms and whether the possibility the gift will fail is so remote as to be negligible. A receipt alone does not resolve that legal condition.
A specific business-owner situation
A company sends funds for a proposed charitable building, with a mandatory refund if approvals fail. The donor needs the actual agreement and project facts before claiming an unconditional contribution.
Illustrative example, not a client result.
What to establish before filing
- Identify the condition and refund rights.
- Assess the likelihood under the applicable regulation.
- Determine when a qualifying completed gift occurs.
Which fact changes the answer?
A genuinely remote contingency differs from a project still facing material unresolved approvals. The facts at the contribution date matter.
A mistake to avoid
Do not treat a book entry or standard acknowledgment as proof that a substantive condition is irrelevant.
Records that support the decision
- Gift agreement.
- Project approval and funding evidence.
- Payment and recipient correspondence.
The decision to document
Have the contribution preparer document timing and revisit the treatment if the condition is resolved or funds are returned.
Business-owner tax planning and preparation scope · Discuss advisory scope with AE
Related questions
- Our corporation bought charity gala tickets. Is the entire payment a charitable deduction?
- Our C corp approved a charitable pledge before year-end but paid later. Is approval enough for a deduction?
Sources and editorial context
- Section 170: charitable deductions and limitations
- IRS Publication 526: charitable contributions
- Treasury regulation 1.170A-1: completed and conditional contributions
General educational information prepared with AI assistance. No individual professional review is claimed. Apply the relevant tax-year rules to the actual records. Editorial policy · AI disclosure.