‘This’ for ‘that’ exchange doesn’t qualify for deduction


It is a well-established tax principle that you are not entitled to a charitable contribution deduction to the extent that you receive something of value in return. 

For example, if you purchase event tickets to support your favorite charity, your contribution deduction is limited to the amount by which the price you pay for the tickets exceeds the value of the tickets. 

A recent Tax Court case illustrates this point (James M. Pollard v. Commissioner, TC Memo 2013-38, Feb. 6, 2013). 

James Pollard purchased property with the intention of building a new home on the site. On applying for a building permit, he was informed that, because his property consisted of less than 70 acres, he would have to obtain approval from the county to increase the property’s building density. 

Initially, the county staff recommended against granting Pollard’s request. After Pollard inquired whether the board might be more agreeable if he granted a conservation easement, a deal was reached. 

The county board approved Pollard’s subdivision exemption to split his property into two parcels and granted him permission to construct a single residential family home on one of the lots. Pollard granted the county a conservation easement on each of the parcels and claimed a charitable contribution deduction. 

The IRS disallowed the contribution deduction Pollard claimed for the easement on the property where he built his house. The IRS did not challenge the other conservation easement. 

The Tax Court concluded that Pollard’s granting of the conservation easement was part of a quid pro quo exchange for the county’s approval of Pollard’s subdivision exemption request. Pollard did not convey the easement for the detached and disinterested motives that characterize a charitable gift. Instead, he did so to secure a personal benefit.