In a case of being “penny wise and pound foolish” a real estate appraiser and entrepreneur, who chose to prepare tax forms and supporting documents himself, was denied by the Tax Court the whole charitable contribution deduction for $18.5 million of real estate properties donated to a charitable remainder unitrust (CRUT).
Under Reg. § 1.170A-13(c)(2), a qualified appraisal has to be signed by a qualified appraiser and has to include specific information (e.g., description of the property). The appraiser cannot be the donor, the taxpayer claiming the deduction, or the donee of the property. (Reg. § 1.170A-13(c)(5)(iv)) Under Reg. § 1.170A-13(c)(2), the donor had to: (i) obtain a qualified appraisal (see below) for the property contributed; (ii) attach a fully completed appraisal summary to the tax return on which the deduction was claimed; and (iii) maintain records relating to the claimed deduction.
The qualified appraisal had to be made no more than 60 days before the gift and no later than the due date of the return, had to be signed by a qualified appraiser, had to include specific information (e.g., description of the property), and couldn’t involve a prohibited fee. The appraiser couldn’t be the donor, the taxpayer claiming the deduction, or the donee of the property. (Reg. § 1.170A-13(c)(5)(iv)). Additionally, the appraisal summary had to include information such as a description of the property, how and when the donor acquired the property and the property’s cost (or other) basis.
Joseph Mohamed, Sr. is a real-estate broker, certified real-estate appraiser, and entrepreneur who filled out his joint 2003 tax return for him and his wife himself, including the Form 8282, Noncash Charitable Contributions. He admitted that he didn’t read the instructions before completing the form because it seemed self-explanatory. In Section B, the Appraisal Summary, he used his own appraisals of the parcels, reporting that he had donated “4 parcels of land, 2 with improvements,” worth $1,010,388, and a “40 acre parcel of vacant land,” worth $14,873,921. He didn’t report his basis, but stated that he had bought all the properties in the ’70s and ’80s. In addition, Mr. Mohamed left blank the Declaration of Appraiser that stated “I declare that I am not the donor, the donee, a party to the transaction”, since he was in fact both the donor and donee.
The IRS realized that the Mohameds had made several mistakes in filing their Form 8283 for 2003 and 2004, and asserted that these mistakes compelled denying the Mohameds any charitable deductions.