By: A.J. Cook

People can imagine many opportunities for a charitable deduction. These are only three:

• Taxpayers took a deduction for giving the right to use air space. R.W. and Mattie Fair of Tyler, Texas, constructed a two-story building to rent for retail stores. They built it so strong that five more floors could be added. Then they donated to a charitable foundation the right to construct those additional floors.
  

The Fairs thought it fair to deduct $70,000 for the air space. The Internal Revenue Service thought that was a lot of hot air. A court disagreed and allowed the deduction. The right to use air space above land is one of the rights of ownership and can be given away.

• Taxpayers took a deduction for donating a rental building uninhabitable because of fire damage. Morris and Frances Scharff had a brilliant idea: Instead of tearing down their damaged building, they contributed it, but not the land, to the Mahwah, N.J., Volunteer Fire Department for training drills.
  

Their deduction really burned the IRS. It said the taxpayers didn't give the property away. And, in fact, they benefited from the transfer: Their damaged building was demolished for them.

The court, however, said that the couple did indeed deed the building to the fire department, and after the firefighters finished, the Scharffs still had to remove the foundation to use the land. Therefore, they got a deduction.

The Scharffs' ruling could have gone either way depending on the point of view. True, the department received a benefit, but the taxpayers didn't give up anything of value to them.

• Taxpayer took a deduction for not using postage stamps. Harry A. Nelson bought a lot of postage stamps. The Miami, Texas, stamp collector said he should get a deduction for the stamp cost because his not using them benefited the government.
  

The court disagreed. It said when Nelson bought the stamps he received adequate consideration for what he paid. No gift there. And he didn't donate the stamps to the government. No gift there, either.

The Moral: To get a deduction, it is better to give than to receive.

A.J. Cook is a lawyer and CPA. His tax column appears weekly in numerous newspapers. Why isn't it published in your hometown newspaper? Ask its Business Editor to subscribe.

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This information is not intended for use without professional advise.
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Released 7-24-00