A recent decision of the Second Circuit Court of Appeals has allowed deductions for a charitable contribution of a façade easement and a related cash contribution, which previously had been disallowed by the Tax Court.

In 2003, Huda Scheidelman applied to a charity to donate a façade easement for a building she owned in Brooklyn. She hired an appraiser who valued the easement at $115,000. Before accepting the donation, the charity insisted that Scheidelman make a cash contribution of $9,275 to defray the charity's operating cost for managing the easement.

The IRS denied both deductions. It said the appraisal was inadequate and that, in exchange for the cash contribution, Scheidelman received valuable services from the charity - acceptance of the easement. In a 2010 decision, the Tax Court agreed with the IRS.

The appellate court accepted the appraisal. More importantly for taxpayers who make cash contributions along with property contributions, the court ruled that Scheidelman received nothing of value in return for her cash contribution. The court concluded that a cash contribution - even a mandatory one - that helps to administer another charitable contribution is itself deductible (Huda T. Scheidelman v. Commissioner, 109 AFTR 2d 2012-XXXX, CA2, June 15, 2012).

A charity's agreement to accept a gift does not transfer anything of value to the donor, even though the donor may desire to have the gift accepted and may expect to derive benefit elsewhere, such as by deductibility of the gift on an income tax return.

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