The Code can be a very effective tool in this process. IRC Sec. 170. P.L. 116-136. See, for example,https://www.taxlawforchb.

9th – December 23rd, 2022Freeman Law’s “The Tax Court in Brief” covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.For a link to our podcast covering the Tax Court in Brief, download here or check out other episodes of The Freeman Law Project.Tax Litigation: The Week of December 19th, 2022, through December 23rd, 2022Starer v. Comm’r, T.C. Memo. 2022-124 | December 20, 2022 |Wells, J. |Docket No. 615-13Mamadou v. Comm’r, T.C. Memo. 2022-121 | December 20, 2022 | Lauber, J. | Dkt. No. 9759-21LBrooks v. Comm’r, T.C. Memo. 2022-122 | December 19, 2022 |Wells, J. |Docket No. 28206-15Summary: This lengthy, detailed, and fact-intensive opinion regards a notice of deficiency issued to Kenneth Brooks and Anita Brooks (the “Brooks”) which disallowed substantial carryover charitable contribution deductions relating to the Brooks’ limited liability company’s (“LLC”) noncash charitable contribution of a conservation easement. In focus are 26 U.S.C. § 170(h) (qualified conservation contribution) and Treasury Regulation, 26 C.F.R. § 1.170A-14 (qualified conservation contributions).The Conservation Easement Grant. On December 15, 2006, the LLC purchased 85.314 acres of real property known as Cotton Row Farm in Liberty County, Georgia, for $1,350,000. The LLC subdivided the property into two parcels of 44.113 and 41.201 acres. The LLC granted and recorded a conservation easement over the 41.201-acre parcel (encumbered parcel) on December 27, 2007, to Liberty County, Georgia, a qualified organization pursuant to section 170(h)(3). The deed that granted the easement (Easement Deed) provided:Grantor, for and in consideration of the sum of ten dollars ($10.00) and other good and valuable consideration and in consideration of the covenants, mutual agreements, conditions and promises herein contained, does hereby grant unto the Grantee, its successors and assigns, forever a conservation easement as defined in O.C.G.A. §§ 44-10-1 et seq. in perpetu

IRC Sec. 512(b)(5).[xxiii] The same way that depreciation deductions and like kind exchanges are.[xxiv] IRC Sec. 170(a). This deduction is treated as an itemized deduction.

ore the signing of the definitive purchase agreement.” But, Petitioners adhered to the literal thrust of the advice given: that “execution of the definitive purchase agreement” was the firm deadline to contribute the shares and avoid capital gains (even if that proved to be incorrect advice under the circumstances).Key Points of Law:Gross Income. Gross income means “all income from whatever source derived,” including “[g]ains derived from dealings in property.” 26 U.S.C. § 61(a)(3). In general, a taxpayer must realize and recognize gains on a sale or other disposition of appreciated property. See id. at § 1001(a)–(c). However, a taxpayer typically does not recognize gain when disposing of appreciated property via gift or charitable contribution. See Taft v. Bowers, 278 U.S. 470, 482 (1929); see also 26 U.S.C. § 1015(a) (providing for carryover basis of gifts). A taxpayer may also generally deduct the fair market value of property contributed to a qualified charitable organization. See 26 U.S.C. § 170(a)(1); Treas. Reg. 16 § 1.170A-1(c)(1). Contributions of appreciated property are thus tax advantaged compared to cash contributions; when a contribution of property is structured properly, a taxpayer can both avoid paying tax on the unrealized appreciation in the property and deduct the property’s fair market value. See, e.g., Dickinson v. Commissioner, T.C. Memo. 2020-128, at *5.Donor-Advised Fund. The use of a donor-advised fund further optimizes a contribution by allowing a donor “to get an immediate tax deduction but defer the actual donation of the funds to individual charities until later.” Fairbairn v. Fid. Invs. Charitable Gift Fund, No. 18-cv-04881, 2021 WL 754534, at *2 (N.D. Cal. Feb. 26, 2021).Two-Part Test to Determine Charitable Contribution of Appreciated Property Followed by Sale by Donee. The donor must (1) give the appreciated property away absolutely and divest of title (2) “before the property gives rise to income by way of a sale.” Humacid Co. v. Commissioner, 42 T.C.

voided the uncertainty of a trial and negotiated a desirable business outcome.As for the bargain element? I believe the federal gift tax regulations are instructive – albeit not applicable, technically speaking – and may serve as guidelines for a business’s decision-makers: first, a corporation cannot make gifts – rather, the corporate transfer is treated as a gift by its shareholders; and second, a transfer of property made in the ordinary course of business (bona fide, at arm’s length, free from donative intent) will be considered as made for full and adequate consideration in money or money’s worth.The opinions expressed herein are solely those of the author(s) and do not necessarily represent the views of the Firm. Why do you think the Code allows a deduction for compensation paid in exchange for services only to the extent it is reasonable for, or commensurate in value with, the services received? IRC Sec. 162. Ordinarily, a contribution is made at the time delivery is completed. IRC Sec. 170. The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts. Which may depend upon the nature of the property contributed (tangible personal property and the use to which it is put), the nature of the gain that would be realized on the sale of the property (long-term capital gain property or ordinary income property), the nature of the charitable organization to which the contribution is made (public charity or private foundation), and whether the contribution is made in trust (as a lead interest or a remainder interest) or outright (in which case the deduction may depend upon whether the interest contributed is less than the donor’s entire interest in the property). IRC Sec. 170(e) and (170(f).There are also limitations on how much of the deduction may be claimed in the year of the contribution and subsequently. Even w

payer bears the burden of proving entitlement to any deductions claimed and of substantiating the amounts of such deductions. See Rule 142(a).Section 170 – Charitable Contribution Deduction. Section 170(a)(1) allows as a deduction any charitable contribution made within the taxable year. The amount of the contribution must be “actually paid during the taxable year.” Treas. Reg. § 1.170A-1(a). To show that “payment” of the claimed contribution, a taxpayer must establish that he or she surrendered dominion and control over the property allegedly contributed. See Pollard v. Commissioner, 786 F.2d 1063, 1067 (11th Cir. 1986), aff’g T.C. Memo. 1984-536.If the taxpayer makes a charitable contribution of property other than money, the amount of the contribution is generally equal to the FMV of the property at the time of contribution. See Treas. Reg. § 1.170A-1(c)(1). “A charitable contribution shall be allowable as a deduction only if verified under regulations prescribed by the Secretary.” 26 U.S.C. § 170(a)(1).Verification of Noncash Charitable Contributions. Extensive regulations govern the verification of noncash charitable contributions. See Treas. Reg. § 1.170A-13. In the case of a contribution of property (other than publicly traded securities) valued in excess of $5,000, the taxpayer must obtain a “qualified appraisal” of the property. 26 U.S.C. § 170(f)(11)(C). The taxpayer must attach to his return “such information regarding such property and such appraisal as the Secretary may require,” which includes a fully completed appraisal summary on Form 8283. Id.; Treas. Reg. § 1.170A-13(c)(2). When a contribution of property is valued in excess of $500,000, the taxpayer must attach a copy of the qualified appraisal to his return. See 26 U.S.C. § 170(f)(11)(D). In the case of a partnership or S corporation, the qualified appraisal requirements “shall be applied at the entity level.” Id. Qualified Appraisal for Charitable Contribution. An appraisal is “qualified” if it is “conducted by a qu

nt had allowed for 2015 and 2016. On January 28, 2022, respondent filed a Motion for Partial Summary Judgment, to which petitioners timely replied.Key Issues:(1) Whether petitioners are entitled under section 1701 to noncash charitable contribution deductions for 2015 and 2016 for portions of the crops transferred to the CRATs.(2) Whether the annuity distributions were taxable to petitioners as ordinary income for 2015–2017.Primary Holdings: No and yes.Key Points of Law:Summary Judgment Standard. The purpose of summary judgment is to expedite litigation and avoid costly, unnecessary, and time-consuming trials. See FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73, 74 (2001).Charitable Contribution Deductions and Substantiation. Income tax deductions are a “matter of legislative grace.” INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). Charitable contribution deductions may be allowable for transfers to a CRAT, corresponding to the value of the charitable remainder interest. See 26 U.S.C. § 170(f)(2)(A); Treas. Reg. § 1.170A-6(b). However, charitable contribution deductions are permitted “only if verified under regulations prescribed by the Secretary.” 26 U.S.C. § 170(a)(1). The Code imposes strict substantiation requirements for noncash gifts, especially where the claimed value of the contribution exceeds $5,000.Charitable Gifts of Property. For gifts of property (other than publicly traded securities) valued in excess of $5,000, the taxpayer generally must (1) obtain a qualified appraisal of the property and (2) attach to the return on which the deduction is claimed a fully completed appraisal summary on Form 8283. See 26 U.S.C. § 170(f)(11)(C); Oakhill Woods, LLC v. Commissioner, T.C. Memo. 2020-24, 119 T.C.M. (CCH) 1144, 1147. A “qualified appraisal” must be prepared by a “qualified appraiser” no later than the due date of the return, including extensions. See 26 U.S.C. § 170(f)(11)(E); Treas. Reg. § 1.170A-13(c)(3). The taxpayer must also maintain records substantiating the dedu

on for that year and carried the balance forward and submitted a partially completed Form 8283. The Form 8283 was missing most information and was substantially mis-completed otherwise, including lack of an appraisal as required by section 170(f)(11)(D) for gifts valued in excess of $500,000. The IRS selected Petitioner’s 2011 return for examination. An IRS staff appraiser determined that the FMV of the sculpture was $250,000. The IRS issued petitioner a timely notice of deficiency, asserting as its primary position that no deduction was allowable because petitioner failed to satisfy the statutory and regulatory substantiation requirements for this gift. The notice determined a deficiency of $95,081 and an accuracy-related penalty of $19,016. Petitioner timely petitioned the Tax Court. Motions for summary judgment were filed on the issue and mainly to determine if Petitioner’s failure to meet the substantiation requirements was due to “reasonable cause and not to willful neglect.” See 26 U.S.C. § 170(f)(11)(A)(ii)(II). This opinion was issued.Key Issues:Whether Petitioner’s failure to meet the charitable contribution substantiation requirements was “due to reasonable cause and not to willful neglect.” See 26 U.S.C. § 170(f)(11)(A)(ii)(II).Primary Holdings:No, sir/ma’am. Petitioner did not have reasonable cause for his failures, and the Tax Court sustained disallowance of the charitable contribution deduction. “We find it wholly implausible that a taxpayer as educated as petitioner, having devoted almost a decade to the study of law, would have acquiesced in the notion that he could properly file a tax return obviously lacking these required elements.”Key Points of Law:Charitable Contribution Principles. Section 170(a)(1) allows as a deduction any charitable contribution made within the taxable year. If the taxpayer donates property other than money, the amount of the contribution is generally equal to the FMV of the property at the time of the gift. See Treas. Reg. § 1.170A-1(c)(1). Where a contrib

IRC Sec. 703(a)(2)(C). IRC Sec. 170(c) and Sec. 509(a). No income tax deduction is allowed for a transfer to a foreign charity.

With respect to subparagraph (5) above, Section 170(c)(2)(B) of the Code provides a definition for “charitable contribution,” being a contribution to a “corporation, trust, or community chest, fund, or foundation organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals[.]” See 26 U.S.C. 170(c)(2)(B). Contributions to “individuals” is not a purpose specified in section 170(c)(2)(B).