June 28, 2012
Tax Court Denies Charitable Deduction for Home Donated to Fire Department and Burned Down in Training Exercise
Bloomberg: Letting Firefighters Raze House Isn’t Charity, Court Says, by Richard Rubin:
A Virginia couple who donated their house to local firefighters for a training exercise can’t deduct the property’s value from their federal income taxes, a divided U.S. Tax Court ruled today. [Patel v. Commissioner, 138 T.C. No. 23 (June 27, 2012)]
Upen and Avanti Patel gave a house they bought and planned to demolish to the Fairfax County Fire and Rescue Department. The firefighters destroyed it, and the Patels deducted $92,865 from their 2006 taxes.
The IRS challenged the deduction and the Tax Court sided with the government, deciding that the Patels hadn’t donated their full interest in the property. “The fire department does not acquire the right to eject the landowner from the building and cannot force the landowner to allow the destruction of the building should he change his mind before the house has been destroyed,” Judge Howard Dawson wrote. “The fire department has acquired a mere revocable license that does not vest any property interest in the fire department.” Seven other judges agreed with Dawson’s opinion and one other concurred in the result. Eight judges dissented.
Paul Caron, a law professor at the University of Cincinnati, said in an e-mail that the split on the Tax Court indicates that the issue “still burns brightly.” Caron added that the details of the decision, which turned on aspects of Virginia property law, may make it difficult to predict how courts will consider similar cases in other states.
Prior TaxProf Blog coverage:
- IRS Burns Kirk Herbstreit's Donation of Home to Fire Department (July 24, 2009)
- IRS Denies Deduction for Homes Donated to Fire Departments and Burned Down (Sept. 26, 2009)
- Court Denies Charitable Deduction for Donation of Home to Fire Department (July 26, 2010)
- Oregon Gubernatorial Race Roiled by Candidate's Charitable Deduction for Donation of Home to Fire Department (Oct. 7, 2010)
- Tax Court Denies Charitable Deduction for Home Demolished by Fire Department in Training Exercise (Nov. 5, 2010)
- Charitable Deductions for Homes Demolished by Fire Department in Training Exercises (Dec. 11, 2011)
- 7th Circuit Denies Charitable Deduction for Home Demolished by Fire Department in Training Exercise (Feb. 9, 2012)
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