Legal Blog

The Weekly Scenario from Steve Shane – 4.29.12

Question: This week I received a call from a client who asked about IRS Form 8283, which is a form that is required to be submitted for non cash contributions to charity. My Q&A this week is less about the actual form itself and more about the importance of seeking professional advice in preparing your taxes, particularly with the changes in the law set to take place next year. In a recent tax court case (Mohamed v. Commissioner 2012-152 (May 29, 2012), the court noted the following: Joseph and Shirley Mohamed donated six real estate parcels (worth over $18 million) to a Charitable Remainder Unitrust or CRUT. Some of the benefits of the CRUT are providing a charitable deduction, income from the property for life and the ability to significantly benefit worthy causes. But the Tax Court ruled this past May that the Mohameds could not claim a charitable deduction for the portion of the property donated to the CRUT because of mistakes Mr. Mohamed makes in completing a certain form (Form 8283). As required on this form for this type of transaction, Mr. Mohamed failed to obtain a qualified appraisal within the required timeframe. Although he was a real-estate broker and a certified real-estate appraiser, the tax regulations explain that he was disqualified as an appraiser here because he was the taxpayer claiming the deduction, the donor claiming the deduction, or alternatively because he was, as trustee of the Charitable Remainder Unitrust, the donee of the real estate properties. Mr. Mohamed’s errors cost him a lot of money. While the Tax Court understood that complete denial of the charitable deductions was a “harsh” consequence, especially when the Mohameds did not “overvalue, and may well have undervalued, their contributions….” Ultimately, the Court reached its result because it did not want to let sympathetic facts “undermine” the established rules. My Take: The Mohameds’ case is instructive for a whole host of reasons. Mr. Mohamed and his wife, at the time, were trying to fund an $18 million CRUT. Seems a little silly for them not to seek independent advice in such a large transaction. In light of the changes set to potentially take place, it may make some sense to have a professional accountant review you or your client’s tax situation to figure out the impact of 2013. Steven E. Shane Principal