Reri Holdings I, LLC v. Commissioner

U.S. Tax Court, 149 T.C. 1, July 3, 2017: Donor’s basis in donated property must be stated on Form 8283.

This decision does not involve a charitable donation of a conservation easement or historic preservation easement but does involve the same substantiation rules applicable to such donations.

Section 1.170A-13 of the Treasury Regulations includes substantiation requirements that apply to charitable contributions made after December 31, 1984, of property worth more than $5,000. This requirement is made applicable to donation of qualified conservation contributions pursuant to Tr. Regs, section 1.170A-14(i), “substantiation requirement.” To meet the requirements, the donor must attach the Form 8283, the appraisal summary, to the tax return on which the donor claims the deduction. The Regulations required the appraisal summary to include the adjusted cost or other basis of the donated property (Sec. 1.170A-13(c)(4)(ii)(E)) and Form 8283 has a blank to fill in for this information.

The taxpayer paid $2.95 million in March 2002 to acquire a remainder interest in property. On Aug. 27, 2003, the taxpayer assigned the remainder interest to a university. On its 2003 tax return, the taxpayer claimed a multi-million dollar deduction(under Tax Code section 170(a)(1)).  Such a claim requires filing Form 8283, Noncash Charitable Contributions, with the tax return. The taxpayer attached the required Form 8283 to its return but left blank the space for the “Donor’s cost or other adjusted basis”.

The court found that this omission did not satisfy the requirement of section 1.170A-13(c)(4)(ii)(E). Further, because the court opined that the omission prevented the appraisal summary from achieving its intended purpose, it held that the omission cannot be excused as “substantial compliance.” Accordingly the court held the taxpayer did not meet the substantiation requirements provided in section 1.170A-13(c)(2), Income Tax Regs., and was not entitled to any deduction under section 170 for its contribution.

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