Real Estate CPA discusses a 2012 Tax Court Case on Charitable Giving | Form 8283

Any real estate CPA knows that valuation is an issue with the IRS, whether you’re buying, selling, trading or giving. As with gifts of art, you’re required to get an appraisal for donations of real estate over $5,000. You must use a qualified appraiser. Plus they require lots of specific information. You don’t have to be a CPA to realize the IRS won’t accept just your word for the donation’s value.

In the 2012 Tax Court case, the IRS denied a charitable deduction for $18 Million of donated real estate. The donor was a real estate developer. Instead of paying a CPA to complete Form 8283, he prepared it himself, using his own appraisal. This may seem like fraudulent intent. But the IRS acknowledged the real estate was probably worth more than the $18 Million. And, that it was a legitimate gift. But because he didn’t use an unrelated appraiser, or provide some of the other required documentation, they denied his claim. So it seems like, perhaps, some arrogance on the donor’s part and an extreme example of the IRS hard lining their procedures.

Is the IRS always this picky?

No, I think the decision surprised most CPAs. I expected the IRS to allow some charitable deduction. In general, I feel the IRS understands that non-fraudulent lapses in procedure happen in their complex environment. I think this decision, which will likely get widespread attention, makes the point that the IRS doesn’t have to be lenient on procedural matters. Or perhaps the donor had other tax transgressions that neutralized any give in their position.

Why would a Real Estate CPA read Tax Court cases?

Sometimes they foreshadow upcoming changes in tax code. Trends work both ways; loopholes appear and disappear.

I’m a CPA in Wilmington NC with a virtual office to serve our long distance and international clients. Planning can sometimes optimize your tax consequences with real estate transactions. For a free phone consult, please call (910) 399-2705.