April 9, 2009 | Read Time: 2 minutes
A federal judge has ruled that owners of a house in a historic district in Oak Park, Ill., cannot take a $216,000 charitable-contribution deduction for donating a facade easement on their home to a preservation group.
Under the terms of the easement, the owners cannot change the front or two sides of the house without written permission from the charity. They must maintain them properly.
The Internal Revenue Service argued that the owners did not follow a federal law that says donors cannot claim write-offs for gifts of $250 or more unless they have acknowledgments from charities that meet certain requirements.
Among them: The acknowledgments must state the amount of cash donated and provide a description of any property contributed. They also must say whether the charity provided goods or services in exchange for a property gift.
The owners had received a letter from the charity that said “for your tax records, enclosed is a statement of your contributions.” Attached was a document that listed two cash gifts — $500 and $21,600 — from the owners; the respective check numbers of the contributions; and, in a column with the heading “Type of Donation,” the word “Easement” as to each amount.
“No other contributions of any kind are adverted to in the letter” and the owners “offered no other written acknowledgment reflecting the donation of a preservation easement as such,” said Judge Milton I. Shadur, in the U.S. District Court for the Northern District of Illinois.
The owners argued “that because the letter lists the cash contributions as ‘easement,’ it covers both the cash amounts and the asserted preservation easement donated by them,” said Mr. Shadur.
But the judge said the owners’ argument “flouts the express language” of the law on acknowledgments. “There is simply no way in which the letter’s identification of cash contributions of $500 and $21,600 can be stretched to encompass facade easements (which are property interests, not money) valued at $216,000,” Judge Shadur said. “Among other deficiencies, there is no description of any claimed easement or its terms in the communication” from the charity, the judge said. (Elizabeth A. Bruzewicz and Howard B. Prossnitz v. United States of America.).
