Tax — income tax — charitable deductions

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United States Court of Appeals For the Seventh Circuit

Civil

Tax — income tax — charitable deductions

The value of a house donated to the local fire department, to burn down as a training exercise, is not deductible.

“We can assume, as the record suggests, that the Rolfs were subjectively motivated at least in part by the hope of deducting the value of the demolished house on their tax return. Applying the objective test, however, we treat their donation the same as we would if it were motivated entirely by the desire to further the training of local firefighters. Objectively, the purpose of the transaction was to make a charitable contribution to the fire department for a specific use. The Rolfs documented their donation and substantiated the basis of their valuation for the IRS as required by the regulations. The Tax Court did not hold that the transaction was categorically invalid under section 170(a), and we agree that nothing in the structure or technical execution of the Rolfs’ donation precluded its potential validity as a qualifying charitable contribution under section 170(a). The Tax Court found instead that when the transaction was properly evaluated, the Rolfs (a) received a substantial benefit in exchange for the donated property and (b) did not show that the value of the donated property exceeded the value of the benefit they received. We also agree with these findings. There was no net deductible value in this donation in light of the return benefit to the Rolfs.”

Affirmed.

11-2078 Rolfs v. CIR

Appeal from the United States Tax Court, Hamilton, J.