Court trims claimed $132M charitable deduction
Barney v. Commissioner. T.C., No. 5310-22.
Tax Court treated the 2012 transfer of Mr. Barney’s S corporation college group to a §501(c)(3) nonprofit as a bargain sale.
The court allowed a charitable deduction, but it sharply reduced the claimed values and left the final tax and penalty amounts for Rule 155 computations.
Holding
The court found the transferred S corporations had a collective fair market value of $300 million at closing. The court also found the promissory notes received had a fair market value of $267 million.
The difference supported bargain sale treatment and a deductible charitable component under §170, but not at the amounts Mr. Barney reported.
Why It Matters
Large noncash gifts tied to closely held businesses live or die on credible valuation. Optimistic management projections can sink the number.
Seller-financed notes get valued at fair market value for §1001 amount realized, not face amount, when the facts support a discount.
The court can allow the deduction while still rejecting the taxpayer’s appraisal conc…
