Rolfs v. Comm'r of Internal Revenue, No. 11-2078 (7th Cir. 2012)Annotate this Case
Taxpayers purchased a three-acre lakefront property in Chenequa, Wisconsin, demolished the house and built another. They donated the house to the local fire department to be burned down in a firefighter training exercise and claimed a $76,000 charitable deduction on their 1998 tax return for the value of the house. The IRS disallowed the deduction. The decision was upheld by the Tax Court. The Seventh Circuit affirmed, finding that the taxpayers did not show a value for their donation that exceeded the substantial benefit they received in return. When a gift is conditional, the conditions must be taken into account in determining fair market value of the donated property. Proper consideration of the economic effect of the condition that the house be destroyed reduces fair market value of the gift so much that no net value is ever likely to be available for a deduction.