{"id":416,"date":"2009-09-01T19:32:37","date_gmt":"2009-09-01T19:32:37","guid":{"rendered":"http:\/\/old.sommers-taxapedia.com\/archives\/?p=416"},"modified":"2012-10-26T19:35:42","modified_gmt":"2012-10-26T19:35:42","slug":"burning-down-the-house-at-the-taxmans-expense","status":"publish","type":"post","link":"https:\/\/sommers-taxapedia.com\/archives\/burning-down-the-house-at-the-taxmans-expense\/","title":{"rendered":"BURNING DOWN THE HOUSE AT THE TAXMAN’S EXPENSE"},"content":{"rendered":"

Introduction<\/strong><\/p>\n

In recent years, it has become fashionable to purchase a small home on a large lot, then destroy the building and construct a “McMansion.” Under the tax law, demolishing an existing home is not deductible.<\/p>\n

However, cleaver taxpayers have found a loophole that permits them to raze the home and obtain a charitable deduction in the process.<\/p>\n

Donating the Home<\/strong><\/p>\n

It turns out that fire departments need homes to test their equipment, practice search and rescue and hone their fire-fighting techniques. Putting the two together, taxpayers donate the unwanted home to a fire department and claim a charitable deduction for its value.<\/p>\n

The fire department then torches the structure for training and testing purposes.<\/p>\n

IRS Response<\/strong><\/p>\n

IRS is not happy about this arrangement and has denied taxpayers a charitable deduction, stating taxpayers received a substantial benefit by having the home demolished.<\/p>\n

IRS has also asserted that because the taxpayers did not donate the land, there was not a gift of the entire property – a potentially weak argument, since taxpayers claim a deduction only for the building.<\/p>\n

Tax Court<\/strong><\/p>\n

In one case, the Tax Court ruled in favor of a taxpayer in just this situation, stating,<\/p>\n

the benefit flowing back to [taxpayer], consisting of clearer land, was far less than the greater benefit flowing to the volunteer fire department’s training and equipment testing operations.<\/p>\n

Conclusion<\/strong><\/p>\n

Donating a home to a fire department makes sense only if the state allows the destruction of the entire structure and the fire department accepts it as suitable for training.<\/p>\n

Expect Congress to eventually step into the fray and side with IRS, but for now, burning down the house may generate a significant tax break.<\/p>\n","protected":false},"excerpt":{"rendered":"

Introduction In recent years, it has become fashionable to purchase a small home on a large lot, then destroy the building and construct a “McMansion.” Under the tax law, demolishing an existing home is not deductible. However, cleaver taxpayers have found a loophole that permits them to raze the home and obtain a charitable deduction …Continue reading<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[62,63,64],"class_list":["post-416","post","type-post","status-publish","format-standard","hentry","category-general-tax-information","tag-donations","tag-home","tag-loophole"],"_links":{"self":[{"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/posts\/416","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/comments?post=416"}],"version-history":[{"count":1,"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/posts\/416\/revisions"}],"predecessor-version":[{"id":417,"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/posts\/416\/revisions\/417"}],"wp:attachment":[{"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/media?parent=416"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/categories?post=416"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/tags?post=416"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}