Thursday, July 20, 2017

Tax Court Says Omission of Cost of Donated Property Justifies Full Disallowance of Deduction

In RERI Holdings I, LLC v. Commissioner, (US TC, July 3, 2017), the United States Tax Court held that a charitable deduction for property should be disallowed in full because the taxpayer failed to include the property's cost basis on IRS Form 8283, the form for reporting Non-Cash Charitable Contributions.  The taxpayer did include the fair market value of the property, which it listed as $33 million.  The Tax Court concluded that the actual fair market value was $3.46 million. Reporting on the case, BNA Daily Report for Executives [subscription required] says that the case has caused a stir among tax lawyers because cost basis is rarely relevant and failure to include it is generally seen merely as a technical violation.  The Tax Court, however, said that listing of cost basis assists the IRS in determining whether the fair market value is overstated.