The Mahwah, N.J., Volunteer Fire Department, the new owner, used the building to conduct fire drills and to test equipment. During the third drill, the department burned down the building completely.

The IRS disallowed the Scharfs' deduction for two reasons: The couple didn't give the building to the department. They only allowed the firefighters to use it. Second, the deal benefitted the couple. They got the building demolished inexpensively.

The court rejected both theories and allowed the deduction. The department owned the building because the couple had transferred title. Also, the primary benefit flowed to the fire department with only incidental benefit going to the taxpayers. The couple still needed to remove debris and demolish the foundation and chimney.

THE MORAL: Even with legitimate gifts, the IRS imagines a smokescreen.

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Court cases reveal imaginative ideas for deducting perceived benevolence. Taxpayers win some and lose some.

Texas farmer Harry A. Nelson, 84, said he deserved a charitable deduction for the cost of commemorative postage stamps he hadn't used.

A court stamped that out. It rejected the idea that non-use resulted in a gift to the United States. The stamps could be used in the future for postage and may even become more valuable.

THE MORAL: A stamp purchaser takes a licking.

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James Winokur wanted to own his art, but also wanted it displayed at the Carnegie Institute Museum. Solution: He gave the museum a 10 percent interest. And he deducted, as a donation, 10 percent of the artwork's total value.

For over 30 years, Winokur had accumulated 44 art objects, including paintings, drawings and sculptures. The gift deed said the Institute could display the art 10 percent of each year and could select which days it wanted. He would keep the pieces the remainder of the time.

The IRS disallowed the deduction, saying the art was not in the museum's possession. The court said that wasn't necessary and reversed the agency. Because the museum and Winokur co-owned the art, either could have possession.

THE MORAL: A gift artfully given can be charitable.

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R.W. and Mattie Fair donated airspace to a charity and took a deduction. The Tyler, Texas couple had built a two-story building and leased it to a florist shop and Sears, Roebuck and Co. They constructed the building so five more floors could be added. The Fairs donated the right to build the floors to a charitable foundation, then they deducted $70,000.

The IRS pointed out that tax regulations contemplate a gift of money or other assets -- not air. Still, the judge allowed the deduction. The court said the right to use airspace above land is one of the rights in land -- and can be given away. (more at Charitable Contributions)

THE MORAL: A deduction for thin air is only fair.