In Uncategorized on 03/27/2017 at 16:40

In More Ways Than One

Despite her middle name, Janice Luck O’Connor, Docket No. 2472-11, filed 3/27/17, doesn’t have any in her motion for reconsideration of the order giving IRS summary J, knocking out Janice Luck’s charitable contribution.

Back in January, while I was packing up and getting ready to sail the ocean blue, Judge Holmes granted summary J to IRS as aforesaid, because Janice Luck’s appraiser failed to consider the restrictive covenants in Janice Luck’s gift of 145 acres of farmland to a 501(c)(3). Note this wasn’t a conservation easement or scenic easement; this was a deed of gift of the whole enchilada.

And as Judge Holmes said back on 1/18/17, he cut Janice Luck a bunch of slack. “We can and have forgiven a number of the shortcomings that are indisputably present in Ms. O’Connor’s qualified appraisal. Using a substantial compliance standard, we have found that an appraisal was qualified even though the partnership obtained it more than sixty days before the contribution, even though the appraisal failed to state that it was prepared for income-tax purposes, and even though the appraisal estimated the fair market value on the date of appraisal instead of on the date of the expected contribution.“ Order, Docket No. 2472-11, filed 1/18/17, at p. 3.

Substantial compliance means “close enough for jazz.” But the appraiser admits he didn’t consider the restrictive covenants, and Janice Luck claims they were inserted at the behest, instance and insistence of the 501(c)(3).

Mox nix, says Judge Holmes.

“See 26 C.F.R. § 1.170A13(c)(3)(ii)(D) (appraisal must include an ‘agreement or understanding entered into . . . by or on behalf of the donor or the donee that relates to the use, sale, or other disposition of the property contributed, including, for example, the terms of any agreement . . . that restricts temporarily or permanently a donee’s right to use or dispose of the donated property.”) (Emphasis added.)

“The appraiser here was similarly required to consider the restrictions placed in the deed, regardless of which party wanted them. The appraiser failed to do so.” Order, Docket No. 2472-11, 3/27/17, at p. 2.

And that’s not a minor fault.

Takeaway- Don’t let your client’s generosity give away the tax deduction while your client is giving away the ranch.

Footnote to Mr. Peter Reilly, CPA: Yes sir, you were right. Judge Holmes was getting up to all kinds of stuff while I was away.

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