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 those rules.” 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 deduction. 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 mlevine@du.edu. Real Estate WARDCENTER for Studies Higher Education for Today’s Real Estate Professional Communication Skills - Doing it Live Communicate persuasively on the phone, in person, digitally, and through hard copy. NEXT ONLINE OFFERING: Nov. 12, 2013 High Tech Marketing for Commercial Real Estate Learn how to use multiple technology, social media, and blog resources through hands-on instruction. NEXT ONLINE OFFERING: Oct. 28, 2013 - Nov. 4, 2013 (4 Sessions) Fundamentals of Real Estate Auctions Learn the key factors regarding successful real estate auctions. NEXT ONLINE OFFERING: Sept. 26, 2013 & Nov. 21, 2013 Understanding Argus: What it Does, How it Works, & Interpreting Argus Output Dive into Argus Valuation DCF, a popular commercial real estate software application. NEXT ONLINE OFFERING: Oct. 7, 2013 - Oct. 9, 2013 & Nov. 19, 2013 - Nov. 21, 2013 CCIM.com Register at www.ccim.com/education or call (800) 621-7027, ext. 3100. September | October | 2013 19