Commercial Investment Real Estate September/October 2013 - Page 20
Good intentions do not replace a qualiﬁ ed appraisal.
by Mark Lee Levine, CCIM, JD, LLM (tax)
T e reason is a failure to follow Internal
Revenue Code regulations and use a quali-
f ed appraiser. As this case illustrates, in
charitable contributions of this size, if such
steps are not properly undertaken, there can
be a complete loss of the deduction.
Taxpayers are generally allowed a charitable
contribution deduction when a gif is given
to a qualif ed charitable recipient. Addition-
ally, the IRC requires a qualif ed appraisal
undertaken by a qualified appraiser. As
def ned by Internal Revenue Service regu-
lations, a qualified appraiser has earned
certain appraisal designations or has met
certain educational requirements. The
appraiser also needs to regularly perform
the kind of appraisals for which the individ-
ual client is paying and meet certain other
requirements, as noted by the Secretary of
the Treasury in IRC Section 170.
Joseph Mohamed Sr., a real estate broker
and a certif ed real estate appraiser, and his
wife set up a charitable remainder trust in
which the taxpayer receives a current deduc-
tion for the property as to the gif portion.
Af er setting up the trust, the Mohameds
donated a number of properties in 2003,
worth millions of dollars. Mohamed f lled
September | October | 2013
out his own tax return and completed a tax
form for noncash charitable contributions.
Mohamed noted that he did not read
all of the form’s instructions and he made
some mistakes on the form. He also claimed
substantial deductions, including about
$230,000 for one property and over $3.6
million on another property. Mohamed said
that he claimed a lower value than the actual
value of the properties, because he did not
want to risk “overvaluing” the properties.
T e taxpayers signed the IRS forms but did
not comply with all of the instructions.
In 2004 the Mohameds donated another
property, a shopping center, to the CRT. T e
taxpayer f lled out IRS form 8283 to make
the contribution but did not complete the
entire form, leaving certain parts of it blank.
He claimed a deduction of almost $500,000.
He did not sign the declaration as to the gif ,
which is required by the IRC.
Mohamed did not include appraisal infor-
mation and did not have a qualif ed appraisal
from a qualif ed appraiser. He said he sup-
ported income and expenses on the property
and the capitalization rate utilized to com-
pute the fair market value of the property.
The IRS audited the Mohameds’ 2003
return. At that time, the taxpayer engaged
appraisers to perform independent apprais-
als of some of the properties. Some of the
independent appraisals came back with valu-
Commercial Investment Real Estate
In the recent case of Joseph Mohamed Sr., et. ux. v. Commissioner,
T.C. Memo 2012-52, the U.S. Tax Court determined that a taxpayer
and his spouse, after making almost $20 million worth of charitable
real estate gifts to qualiﬁ ed charitable recipients, could not take the
$18.5 million tax deduction for the gifts.