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Charitable Planning is Not a DYI Project

A California entrepreneur got a harsh lesson on the rules of charitable contributions… when the U.S. Tax Court denied his $18.5 million deduction for real estate donations —not because he inflated their values, but because he didn't follow the rules.

When it comes to charitable giving success, you must dot all the i’s and cross all the t’s. Remember, with the IRS and the tax court, the devil truly is in the details.

This was the lesson Joseph Mohamed, Sr., a generous (and wealthy) real estate developer, recently learned. Rueters recently reported on his case in an article titled “A harsh lesson on charitable contributions.”  

It seems Mr. Mohamed had more than the requisite charitable intent but failed to follow the strict rules required to claim the deduction for his generous contribution of real estate worth in excess of $18.5 million. The problem? If you make a charitable contribution in the form of real property worth more than $5,000, then the real estate must be properly appraised and the appraisal must accompany the donation form.

Unfortunately, Mr. Mohamed (who, ironically, is a certified appraiser) failed to follow this fundamental requirement. Even though the tax court conceded that the real estate in question likely was worth at least $18.5 million, the deduction was not granted.

You can learn more about charitable planning on our website. Be sure to sign up for our complimentary e-newsletter to stay abreast of issues like these that could affect you, your loved ones and your estate planning.

Reference: Reuters (June 1, 2012) “A harsh lesson on charitable contributions

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