Isaiah and Susanna Huff have been clients of our firm for several years. In 2019, they purchased
Question:
Isaiah and Susanna Huff have been clients of our firm for several years. In 2019, they purchased an old, two-bedroom lakefront house on the shore of Lake Conroe. Wanting a larger home on the property, they decided to demolish the old home a build a larger, more modern home.
In January 2020, they received three bids for demolition of the home. The lowest bidder, JRP Demolition Services, proposed demolishing the home and clearing the site for $15,000. Not wanting to spend that much money, Isaiah contacted the Lake Conroe Volunteer Fire Department. After talking with the fire chief, they agreed that the Huffs would donate the home to be burned down by the fire department during a firefighter training exercise. Included in the agreement was a provision that required the home to be completely destroyed within three weeks.
On February 17, 2020, the fire department conducted their training exercise, which resulted in complete destruction of the home. The Huff’s residential real estate appraiser, Ronald Hall, had previously prepared a valuation report that indicated the lot and value of the home was $500,000. After the fire department completed their training exercise, Ronald updated his appraisal report and valued the remaining land at $418,000.
While dropping off their tax file, Isaiah informed you of the situation. Susanna has done some research and feels they are entitled to a charitable deduction of $82,000 for donating the home to the fire department for firefighter training.
Research the issues below and provide the relevant statutory rules and at least one court case (you may need more cases) that interprets the statutory rules as they relate to the issues. You must make a conclusion that answers the issues based on your arguments contained in the analysis section of your memorandum.
- Does the donation of the home to the fire department qualify for a charitable deduction?
- If the answer to 1 is yes, what is the amount of the deduction?
