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the Foundation in an amount equal to the fair market value of the
Bank stock in the amount of $553,847.” Respondent denies that
averment and, on brief, argues that petitioners are not entitled
to the disallowed deductions because the shares were not
“qualified appreciated stock”, as that term is defined in section
170(e)(5)(B). Alternatively, respondent argues that petitioners
are entitled to no deduction on account of the transfer of the
shares to the foundation because petitioners failed to comply
with regulations requiring the substantiation of claimed
charitable contributions. Respondent does not, however, ask for
any increased deficiency in connection with his alternative
argument (he has allowed a deduction of $33,338 for 1994).
We agree with respondent that the shares were not qualified
appreciated stock. We also agree with respondent that
petitioners did not substantiate the transfer as required by
regulations. Therefore, petitioners are not entitled to the
disallowed deductions. After setting forth the relevant
provisions of the Code and the regulations, we will discuss our
reasons for agreeing with respondent.
II. Code and Regulations
A. Code
In pertinent part, section 170(a)(1) provides:
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