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May 31, 2012

Couple Loses $18.5-Million Gift Deduction on Paperwork Error

A U.S. Tax Court judge has ruled that a California couple cannot claim a tax break for donating millions of dollars worth of property to charity because they did not include a proper appraisal with their return, according to The Wall Street Journal.

Sacramento real-estate broker and appraiser Joseph Mohamed and his wife, Shirley, donated multiple properties to their charitable remainder trust in 2003 and 2004, listing a self-assessed value of $18.5-million on their tax form. Mr. Mohamed did his own taxes and acknowledged he did not read the instructions for claiming the deduction, according to the decision handed down May 29.

A subsequent independent appraisal found that the Mohameds had undervalued the properties. But Judge Mark V. Holmes, while expressing sympathy for the couple, said that under specific rules laid down by Congress they lost their right to the deduction by not submitting the proper paperwork when they made the claim.