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1(h)(4)(i), Income Tax Regs. But if a taxpayer knew or should
have known that a charity’s estimate of the fair market value of
the consideration it provided was not reasonable, he cannot take
the deduction. Sec. 1.170A-1(h)(4)(ii), Income Tax Regs. And
that’s the situation here. Even if Roark did not have actual
knowledge that NCF would pay the policy premiums, he should have
known. He was a sophisticated businessman, and all the paperwork
was available to him. He signed much of it. All the letters
were sent to him. It would have been simply unreasonable for him
to conclude that this split-dollar agreement did not benefit him
and his family at all.
In the end, then, this case is indistinguishable from Addis.
Though NCF wrote that “no goods or services have been provided in
connection with this gift” each time Roark sent in money, he knew
or should have known that he would receive some value in return.
Since the donation was not properly substantiated under section
170(f)(8), and the Roarks unreasonably relied on it contrary to
the provisions of section 1.170A-1(h)(4), Income Tax Regs., we
hold that they may not deduct the $160,000 he contributed to NCF.
We need not reach any other arguments, but because the
Commissioner conceded a $20,000 increase to the Roarks’
charitable deduction,
Decisions will be entered
under Rule 155.
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Last modified: May 25, 2011