May 31, 2007 | Read Time: 1 minute
The Internal Revenue Service says it is investigating a possible tax scam involving charities that accept donations of a type of property lease.
In a letter to Sen. Max Baucus, the Montana Democrat who chairs the Senate Finance Committee, the tax agency says it has identified 48 companies, mostly in New York, whose investors have claimed about $271-million in charitable deductions involving questionable donations of interest in real-estate leases.
The arrangement being reviewed involves a group of investors who form a company to buy a so-called “remainder” lease for a piece of property. The lease is appraised at a value the IRS considers to be inflated. The investors then donate their interest in the lease to a charity, and each investor writes off a share of the donation on his or her income-tax return.
The charity benefits when the investors later buy back the lease, usually paying the charity far less than the amount the donors claimed it was worth when calculating their deductions.
The IRS says it is looking at all deductions from 2003 and later to see whether more entities participated in such arrangements, and is examining the role charities may have played.
“The facts as developed so far have raised questions about the propriety of the charitable deductions claimed and the role some charities played in receiving the donations,” wrote Kevin M. Brown, then the deputy commissioner for services and enforcement at the IRS, in the letter to Senator Baucus.
Mr. Brown is now the acting Internal Revenue Service commissioner, replacing Mark W. Everson, who resigned the commissioner’s post earlier this month to become chief executive of the American Red Cross.
Mr. Brown said the tax agency has not yet decided what actions to take in the cases.
