In a message dated 1/18/2006 7:31:08 PM Eastern Standard Time, 
[log in to unmask] writes:

Unless you provide them with a 1099 or whatever IRS filing form may be 
required (if one is), the return of their donation will not be subjected to tax or 
penalty because obviously it cannot be considered as income.

I would also consult with your State's Attorney General's office regarding 
the refunds.

Pam
**************

Obviously the IRS will want back any tax that was not paid because of any 
deduction for the donation.

A tax advisor would give an opinion as to whether this would be handled with 
an amended return or as miscellaneous income in the year if the return of the 
donation.  Interest might be due. 

It is unlikely that there would be a penalty unless it appeared that this was 
part of a tax avoidance scheme. Proper documentation of the refunding should 
be left to professionals.

The institution should suggest consulting a tax advisor rather than giving an 
opinion itself, at least in writing. The best handling of the transaction may 
depend on the individual circumstances of the donor.

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