LOS ANGELES, Oct. 9, 2013 /PRNewswire/ -- The recent Tax Court decision in Friedberg v. Commissioner, T.C. Memo. 2013-224 (Friedberg II) in which a faulty appraisal for a facade easement was still found to be a "qualified appraisal" for charitable deduction purposes was the subject of a recent Accounting Today article written by Los Angeles tax attorney Bruce Givner of Givner & Kaye.
The Friedberg case centered on the donation of a facade easement and transferable development rights to the National Architectural Trust in 2003 by the Friedbergs, who purchased a home in Manhattan's Upper East Side Historic District. The NAT contacted the Friedbergs and asked that they donate a facade and development rights easement; by doing so, the Friedbergs would receive a total estimated charitable deduction of over $3.8 million.
The NAT recommended a Pittsburgh appraiser to document the deduction. The IRS reviewed the Friedberg's tax returns and asserted a $1,321,250 deficiency and a penalty of $528,500. In the first Friedberg decision of 2011, the Tax Court found in favor of the IRS for the facade deduction, relying on the earlier Scheidelman v. Commissioner opinion that found the method used in valuating the donation failed to meet legal standards.
Following the Friedberg I decision, the Second Circuit Court vacated and remanded the Scheidelman I decision, noting that it did not matter if the valuation itself was faulty or inaccurate because the law states that the appraiser only has to identify the valuation method used, not that it is reliable.
In light of the Scheidelman II decision, the Tax Court reconsidered its Friedberg I opinion, reversing itself and finding the facade and development rights easement appraisal to be a qualified appraisal.
"This case shows the difference between 'logic' and 'tax logic'," Givner noted. "Only in Tax Court is a very bad appraisal a 'Qualified Appraisal'."
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