Commercial Investment Real Estate September/October 2013 - Page 21
ation determinations that were very close to
the positions that Mohamed held. Mohamed’s
total appraisal value was a little more than
$18.5 million; the independent appraisals
showed a little more than $20.2 million.
Despite the fact that the Mohameds
claimed a deduction that was less than the
independent appraisers determined, the tax
court denied the deduction. T e commis-
sioner held that the Mohameds made many
mistakes on the forms that they f led and
that the forms were incomplete.
T e court noted that IRC Section 170
states the requirements to gain the tax
deduction and specif cally requires substan-
tiation and steps to undertake when one is
making a substantial charitable deduction.
T e taxpayer did not properly comply with
the regulations. (T e general rule is that
when the deduction exceeds $5,000 with
property as opposed to cash, the substan-
tiation to support the same is necessary.)
The court also stated that the qualified
appraiser cannot be the taxpayer but must be
In charitable contributions of this size, if steps are
not properly undertaken, there can be a complete
loss of the deduction.
an independent appraiser. One of the thresh-
old requirements is that the appraisal sum-
mary needs to be signed by the appraiser. T e
court held that the appraisals were not quali-
fied appraisals because Mohamed did the
appraisals himself. Further, he attached state-
ments that were not proper appraisal summa-
ries, and the independent appraisals that were
undertaken came too late to meet the require-
ments of the Treasury regulations. T e court
concluded that the regulations were valid and
there was not substantial compliance.
The court found that “the Mohameds
made several of their own mistakes” and
concluded that the mistakes were signif -
cant. “We recognize that this result is harsh:
a complete denial of charitable deductions to
a couple that did not overvalue, and may well
have undervalued, their contributions....”
T e court said that the problems of the
Mohameds were so great, and the regula-
tions were so specif c to allow a taxpayer to
claim a charitable deduction, that “we can-
not in a single sympathetic case undermine
T is case illustrates that taxpayers must
be very careful to comply with the require-
ments in the law for charitable deductions.
A “good faith attempt” at a reasonable
valuation and an altruistic goal to give
to charity are not suf cient to support a
Mark Lee Levine, CCIM, JD, LLM (tax), is a pro-
fessor and past director of the Burns School
of Real Estate and Construction Management,
Daniels College of Business, University of Den-
ver. Contact him at email@example.com.
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