Attorney-at-Law

I GOT PLENTY O’ NUTTIN’

In Uncategorized on 10/14/2011 at 16:49

In the words of Ira Gershwin, from the 1935 American opera Porgy an’ Bess. Tax Court’s recent releases have been Section 7463 “Not for nuttin’” cases. None of them even explores interesting legal issues. And no, while they’re just as obvious as Christy & Swan Profit Sharing Plan, 2011 T.C. Mem. 62, filed 3/15/11, as discussed in my post “Maybe Not So Obvious”, 8/28/11, these truly are so obvious that no unwary person should be caught in their clutches.

By way of illustration of the foregoing, we have Robert David Wuerth & Cynthia Wuerth, 2011 T.C. Sum. Op. 121, filed 10/13/11. Bob and Cynthia’s Indiana homestead was hit by a tornado. Bob, a CPA who taught graduate courses in accountancy on-line, ascribed part of his loss to the business portion of the house (the home-office gambit). So far, so good, but the problem comes in with determining what the house was worth immediately pre-twister and immediately post-twister.

Bob put together some numbers and plugged them into his self-prepared returns (1040 for himself and Cynthia, and 1065 for his business partnership–incidentally, with Cynthia). IRS audited, and Judge Cohen takes up the story: “During the course of the examination, petitioner hired an appraiser to determine the value of the Indiana real property both before and after the tornado. The appraiser had not personally appraised the property before the damage occurred and relied on the statements petitioner made regarding its previous condition. The appraiser ultimately determined that the market value of the property before the tornado was $250,000 and after the tornado was $117,000. The appraisal report included numerous errors, including misstating the calculations for the pre-tornado value of the real property as totaling $220,000 and $240,000 at different points in the report.” 2011 T. C. Sum. Op. 121, at pp. 4-5.

The Regulations require that pre-casualty and post-casualty valuations “shall generally be ascertained by competent appraisal.” Sec. 1.165-7(a)(2)(I). Bob’s hastily-prepared “appraisal” doesn’t satisfy the competency test. Even though Wuerth assisted in its preparation, the appraisal is found to be Wuerthless (sorry, guys).

Next is “what’s in a name?” Shakespeare’s rose by any other name helps out, but does not rescue, Tawana L. Bradley, 2011 T.C. Sum. Op. 120, filed 10/12/11.

Tawana was a cheerleader for the cheerleaders who encouraged the Muhammad Ali Youth Football and Cheerleaders League. Claiming it was a 501(c)(3) exempt organization, she took a charitable deduction when she chartered a bus and paid for it, to transport said cheerleaders and athletes to various competitions. At trial, she got the name of the organization wrong.

Fortunately, the receipt from the bus company was close enough. Judge Ruwe: “Petitioner testified that she volunteered as a cheerleading coach for the Muhammad Ali Youth Football and Cheerleaders League, which is not listed in Publication 78 as an organization that is eligible to receive tax deductible charitable contributions. However, the Muhammad Ali Youth Football and Cheerleaders League is not the group named on the charter bus confirmation that petitioner submitted in support of her claimed deduction. Instead, the charter confirmation form names the Yellow Jackets Cheerleaders as the group. According to Publication 78, the Muhammad Ali Yellowjackets, Inc., is a qualified organization that was formed in Kentucky. Given the similarities of the group names and the location of the groups within the Commonwealth of Kentucky, it appears that petitioner confused the organization’s name while testifying. Given that her testimony was reasonable and that she has provided reliable evidence of the group’s actual name, we find that petitioner’s activities were services to the Muhammad Ali Yellowjackets, Inc.” 2011 T.C. Sum. Op. 120, at p. 6.

All would be well, but for Tawana’s lack of a Section 170(f)(8)(A) statement from the Yellowjackets. Since the bus charter was more than $250, the receipt from the bus company doesn’t affirm the requisites that only the Yellowjackets could provide, namely, that Tawana got nothing back from the Yellowjackets, or described the goods or services Tawana donated, or gave an approximate fair value for the goods or services. See my post “The $250 Misunderstanding”, 6/3/11, and Jan Elizabeth Van Dusen 136 T.C. 25, released 6/2/11. So no deduction.

Nothing new here.

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