William P. Short, Jr. and Mary E. Short - Page 6

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          the State, all the disputed land, including the 1988 gift land.             
          The agreement included a side agreement whereby Secretary Clark,            
          who was authorized to sign Internal Revenue Forms 8283 (Noncash             
          Charitable Contributions) on behalf of the Delaware Department of           
          Natural Resources, executed the donee acknowledgment portion of             
          Form 8283 with regard to the 1988 gift land.                                
               Pursuant to the terms of the agreement, deeds and documents            
          were recorded to finalize the property transfer, including a May            
          29, 1992, quitclaim deed to the 1988 gift land (the 1992 quitclaim          
          deed).3 The State also had an option under the agreement to                 
          purchase additional land from petitioners at a bargain sales price.         
          A July 25, 1992, Stipulation of Dismissal concluded the State court         
          action.                                                                     
          Petitioners' Federal Income Tax Returns                                     
               Petitioners did not claim a charitable contribution deduction          
          with regard to the 1988 gift land on their original 1988 Federal            
          income tax return.4  On April 15, 1992, petitioners amended their           
          1988 return to claim a refund based on their entitlement to a               
          $5,810,000 charitable contribution deduction, arising from their            


               3    The parties utilized a quitclaim deed because Delaware            
          law treats a quitclaim deed as conveying any title that the donor           
          has.  It is not, however, an acknowledgment of title.  Thus, by             
          accepting petitioners' 1982 quitclaim deed, the State of Delaware           
          did not recognize that petitioners ever held title to the 1988              
          gift land.                                                                  
               4    Petitioners reported capital gains in excess of $8                
          million on their 1988 return.                                               




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