Tax Court In Brief | Scheizer v. Comm'r | Charitable Contribution Substantiation And Reliance On Tax Professional

Published date11 October 2022
Subject MatterTax, Income Tax, Tax Authorities
Law FirmFreeman Law
AuthorFreeman Law

Tax Litigation: The Week of October 3rd, 2022, through October 7th, 2022

  • Sander v. Comm'r, T.C. Memo. 2022-103 | October 6, 2022 | Morrison, J. | Dkt. No. 22472-16

Scheizer v. Comm'r, T.C. Memo. 2022-102 | October 6, 2022 | Lauber, J. | Dkt. No. 3679-18

Short Summary: This case concerns a charitable contribution deduction for a gift of art and substantiation requirements of section 170(f)(11) and related Treasury Regulations. Petitioner, Schweizer, is an art dealer, lawyer, and otherwise heavily educated and involved in the commercial industry of artworks. He engaged Wasserman & Wise (Wasserman firm) to prepare his income tax returns. Petitioner donated works of art to various museums. He claimed charitable contribution deductions for these gifts, all of which were reported on returns prepared by the Wasserman firm. Petitioner donated a sculpture and anticipated claiming a charitable contribution deduction for this gift. So, with professional assistance, he requested a Statement of Value (SOV) from the IRS with respect to the sculpture. The proposal valued the work at $600,000, although the appraiser was a novist in the matter. Without receiving a response from the IRS, The Wasserman firm prepared, and Petitioner filed a return claiming a $600,000 deduction for his gift of the sculpture. The amount exceeded the maximum allowable as a deduction for 2011, see ' 170(d)(1)(A), so Petitioner claimed a $406,395 deduction for that year and carried the balance forward and submitted a partially completed Form 8283. The Form 8283 was missing most information and was substantially mis-completed otherwise, including lack of an appraisal as required by section 170(f)(11)(D) for gifts valued in excess of $500,000. The IRS selected Petitioner's 2011 return for examination. An IRS staff appraiser determined that the FMV of the sculpture was $250,000. The IRS issued petitioner a timely notice of deficiency, asserting as its primary position that no deduction was allowable because petitioner failed to satisfy the statutory and regulatory substantiation requirements for this gift. The notice determined a deficiency of $95,081 and an accuracy-related penalty of $19,016. Petitioner timely petitioned the Tax Court. Motions for summary judgment were filed on the issue and mainly to determine if Petitioner's failure to meet the substantiation requirements was due to "reasonable cause and not to willful neglect." See 26 U.S.C. ' 170(f)(11)(A)(ii)(II). This opinion was issued.


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