organization when the donor maintained control over the funds transferred, which went toward personal uses such as subscriptions, dues, and training courses115
Payments to a charitable organization for tickets to a benefit concert116
Payments to a charitable organization in exchange for food and drink117
Ostensible transfer and reconveyance of land between a partnership and a church that was, in general, held to lack economic substance; the transaction constituted a purchase rather than a gift118
Payments by parents to a charitable organization that paid their children's tuition; the payors were not allowed to deduct as charitable contributions the amounts paid to the organization in excess of the tuition payments119
Payment by individuals to a charitable organization that operated a retirement community, because payment obligated the organization to build a cottage for them120
Payments by a minister to his church (held to be his alter ego), inasmuch as he retained control over the money and property involved121
Payment made pursuant to a plea-bargain agreement, which was found to amount to consideration enabling the “donor” to escape incarceration122
Grant of a conservation easement to a county, which was part of a quid pro quo to cause the county commissioners to grant the “donor's” request for a subdivision exemption, which he needed to develop the property123
Grant of a conservation easement to a county, which was part of a quid pro quo transaction, because the transferor of the easement, a real estate developer, expected a substantial benefit in the form of an increase in value of the surrounding residential lots by reason of use of the eased property as a park124
Dedication of real property to a city, which was part of a quid pro quo transaction to cause the city to approve a planned community development plan, with the expectation of a subsequent plan approval125
On rare occasions, a donor will prevail in a quid pro quo contribution case. This occurred, for example, where a court rejected the government's contention that a real estate developer transferred real property to a town as inducements for a zoning board's approval of projects. The court declined to find the existence of a verbal, unenforceable agreement between the parties.126
In a peculiar set of circumstances, a court held that an individual was not entitled to any charitable deduction for a gift of property made by a company he owned because the company had the right to transfer the property to another charity.127 The charity this donor wanted to be the donee did not have its tax exemption recognized, so he agreed that the gift would be made to another charity, the charitable status of which was recognized. The court ruled that this restriction on transferability afforded the company a “substantial—indeed paramount—element of dominion and control over the subject of the purported gift, exercisable against [the second charity], after the transfer of legal title to it.”128 (As it turned out, this condition was disregarded, with the property promptly transferred from one charity to the other.129)
The quid pro quo law in the charitable contribution context gained national attention when the Department of the Treasury and the IRS used it to combat the efforts in some states to circumvent the $10,000 limit on the deductibility of state and local taxes130 by substituting an increased charitable deduction for a disallowed state and local tax deduction. Proposed regulations were issued providing rules stating the lack of availability of federal income tax charitable contributions deductions when a transfer of money or other property is made pursuant to one of these SALT cap “workarounds.”131 These regulations were subsequently issued in final form.132
The general rule, under these regulations, is that when a taxpayer receives or expects to receive a state or local tax credit in return for a payment to a charitable organization, the receipt of the tax benefit constitutes a quid pro quo that may preclude a full charitable deduction. That is, the amount otherwise deductible as a charitable contribution generally must be reduced by the amount of the state or local tax credit received or expected to be received.133 Nonetheless, a taxpayer may disregard a state or local tax credit if the credit does not exceed 15 percent of the taxpayer's payment or 15 percent of the fair market value of the property transferred by the taxpayer.134 (This quid pro quo principle does not apply in instances of dollar-for-dollar state or local tax deductions.135) Treasury and the IRS stated, in the preamble to the proposed regulations, that “[c]ompelling policy considerations” mandate these rules, in that “[d]isregarding the value of all state tax benefits received or expected to be received in return for charitable contributions would precipitate revenue losses that would undermine and be inconsistent with the limitation on the deduction for state and local taxes adopted by Congress.”136
The quid pro quo principle applies with respect to a contribution irrespective of whether the party providing the quid pro quo is the donee or a third party. A person is treated as receiving goods or services in consideration for the person's payment or transfer to a charitable organization if, at the time the person makes the payment or transfer, the person receives or expects to receive goods or services in return.137 The phrase in consideration for embraces goods or services provided by the charitable donee “or any other party” in return for the payment.138
In some circumstances, a benefit to a donor will not cause loss or reduction of a charitable contribution deduction but instead will trigger taxation of gain in addition to a tax deduction. This involves the step transaction doctrine, which is discussed elsewhere.139 Nonetheless, it is appropriate to illustrate the point here. In one case, an individual contributed appreciated securities to a charitable organization with the understanding that the charity would liquidate the stock and purchase his yacht with the sales proceeds. The charity completed the transaction; the donor was found to be taxable on the gain realized as
