rel="nofollow" href="#ulink_935e9976-38ed-57c7-83ee-ed7848037a4a">140 The appellate court wrote that “where there is an understanding that a contribution of appreciated property will be utilized by the donee charity for the purpose of purchasing an asset of the contributor, the transaction will be viewed as a matter of tax law as a contribution of the asset—at whatever its then value is—with the charity acting as a conduit of the proceeds from the sale of the stock.”141 The court added: “This makes the taxpayer/putative-donor taxable on the gain of the stock though entitled to deduct the value of the asset given, whatever that value in fact is.”142
(d) Incidental Benefits
When a benefit to a donor is incidental, the benefit will not defeat the charitable deduction. The following are instances of application of that rule.
A tornado destroyed several homes in a town. The local chapter of the American National Red Cross provided food and temporary shelter to an individual whose home was destroyed. The individual, motivated by gratitude, made a (deductible) contribution to the chapter. 143
An individual owned a home in an area served by a volunteer fire department. Neither state nor local taxes were used to support the fire department. The individual made a (deductible) contribution to the volunteer department's annual fund drive.144
An individual's daughter was a member of a local unit of the Girl Scouts of America. The individual made a (deductible) contribution to the Girl Scouts of America.145
Merchants and owners of property in a city made (deductible) contributions to the city to enable it to provide railroad companies with new facilities outside the city, in exchange for the railroads' removal of their inner-city facilities and relinquishment of their right of way through the city (even though the merchants and property owners received some benefit from removal of the railroad facilities).146
An organization made (deductible) contributions to a police department to assist the department, as a regular part of its operations, in offering rewards for information leading to the apprehension and conviction of persons engaging in criminal activity within the community in which the organization was located.147
A parent of a murdered individual made a (deductible) contribution of reward money to the police department of a political subdivision for information leading to the conviction of the murderer, with some or all of the money available for public purposes if not needed to pay the reward.148
An individual made a (deductible) contribution of a tract of land to the federal government and retained the right during his lifetime to train his hunting dog on the trails extending over the tract.149
A developer of a residential community made a (deductible) contribution of real estate, tangible personal property, and cash to a state to assist in the construction of a highway (even though the highway would benefit the planned community).150
An individual made a (deductible) contribution of a tract of land and a house to an educational organization for a conference and retreat center. The contribution was deductible even though the donor retained an adjoining lot for personal use and a nonexclusive easement for pedestrian and vehicular ingress and egress over the existing driveway on the contributed lot.151
A member of a federal advisory committee, who incurs unreimbursed travel and other out-of-pocket expenses while performing services without compensation as a member of that committee, is entitled to a charitable deduction for the expenses as long as the requirements for the deduction are satisfied (“other than those relating to the expectation of any benefit or financial return”).152
When a private foundation153 is a charitable donee and the donor is a disqualified person154 with respect to the foundation, care must be exercised that the contribution is not an act of self-dealing.155 An act of self-dealing can be caused if the making of a gift bestows a benefit of some consequence on the disqualified person/donor. When the benefit is merely “incidental and tenuous,” however, an act of self-dealing will not result.156
The application of rationales other than the quid pro quo test in relatively recent years is somewhat surprising, in that Congress, speaking by means of legislative history in 1954, wrote that gifts are “contributions which are made with no expectation of a financial return commensurate with the amount of the gift.”157 Thus, it would seem that the quid pro quo test should, unquestionably, be the law.
(e) Requirement of Transfer of Value
In some instances, a federal income tax charitable contribution deduction is denied because nothing of substance or value was transferred to a charitable organization. For example, in one case, a charitable contribution deduction for the transfer by a corporation of certain film property to the Library of Congress was denied on the ground that what was physically conveyed (principally, negatives on nitrate-based plastic) had little value; the donor claimed a deduction of more than $10 million.158 Also, a motion picture production company retained access to the property and was relieved of storage costs and potential liability, which the court found to undercut the concept of a gift.
In another case, donors of mining claims to charity were held not to be entitled to any charitable deduction, because the claims lacked any value.159 The court found a “total absence of objective support for the value claimed” and that the testimony of the “donor's” expert witness stated values that were mere “financial fantasies.”160
Still another case offers a graphic illustration of this point. In this instance, a court upheld the IRS's denial of a charitable contribution deduction claimed by a corporation for an alleged donation of real property to a state. The IRS had denied the deduction primarily on the basis that the corporation did not own the real property that it had purported to contribute.161 On appeal, however, the decision was reversed, with the court—applying the doctrine of collateral estoppel—ruling that the government was barred from challenging the ownership of the property in dispute, on the ground that the issue in a condemnation proceeding and the litigation in the case were identical.162
