Kaufman v. Shulman, No. 11-2022 (1st Cir. 2012)Annotate this Case
Taxpayers bought and renovated a $1,050,000 row house in the South End of Boston, subject to historic preservation restrictions. In 2003, they learned about a tax incentive program for historic preservation, promoted by National Architectural Trust, which advised them that the Trust could help them qualify for a deduction of 10 to 15 percent of fair market value. Internal Revenue Code, 26 U.S.C. 170(h), creates an incentive for donation of property interests to nonprofit organizations and government entities for "conservation purposes," including preservation of "historically important" land or structures. Taxpayers made a $1,000 deposit, executed a Preservation Restriction Agreement, and sent another $15,840. On their 2003 return they claimed a cash contribution of $16,870 to the Trust and a noncash contribution of $220,800 for the easement donation (spread to 2004 return). In 2009, the IRS sent "Notice of Deficiency" and calculated that they owed an additional $39,081.25 for 2003 and an additional $36,340.00 for 2004, plus underpayment penalties. The Tax Court disallowed any deduction for the easement, but held that they were entitled to deduct their $16,840 cash contribution on their 2004 return. The First Circuit vacated and remanded, rejecting the reasoning for disallowing the deduction for the easement.