Tax Court: No Deduction for Burning Down the House

The Tax Court held that taxpayers who allowed local firefighters to conduct training exercises in a house they owned, which included burning the house to the ground, could not deduct the value of the destroyed structure as a charitable contribution under Section 170.

Taxpayers purchased a property in Vienna, Virginia with the intent of tearing down the existing structure and building a new home on it. Rather than simply tearing the existing house down the taxpayers allowed the Fairfax County Fire and Rescue Department to burn the house down as part of a training exercise. Before allowing the fire department to destroy the house, the taxpayers hired an outside appraisal firm to value the property with the then-existing structure. The taxpayers deducted approximately one half of the appraised value of the property as a non-cash charitable deduction. The IRS disallowed the deduction under examination and imposed accuracy-related penalties.

The court held that the taxpayers only gave the fire department a license to use the house and did not convey a property interest in the property. Since the taxpayers donated only the use of the property, it only constituted a partial property interest and therefore did not meet the requirements of Section 170(f)(3). Despite disallowing the deduction in full, the court refused to impose penalties.

Read the entire opinion here:
Patel v. Commissioner, 138 T.C. No. 23 (2012)

Please note that the opinion made no mention of the Talking Heads or their music. Compare U.S. v. Abner, 825 F.2d 835 (5th Cir. 1987).

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