John C. and Tate M. Todd v. Commissioner

118 T.C. No. 19UNITED STATES TAX COURT
JOHN C. AND TATE M. TODD, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 17046-99. Filed April 19, 2002.
R disallowed deductions claimed on account of a
contribution of corporate shares to a private
foundation (other than a private foundation described
in sec. 170(b)(1)(E), I.R.C.) on the alternative
grounds that the shares were not qualified appreciated
stock, within the meaning of sec. 170(e)(5)(B)(i),
I.R.C., and that the shares were not publicly traded
securities, within the meaning of sec. 1.170A-
13(c)(7)(xi), Income Tax Regs., so that the
substantiation requirements of sec. 1.170A-13(c)(1)(i),
Income Tax Regs., applied but were not satisfied.
1. Held: Deductions disallowed; the shares were
not qualified appreciated property.
2. Held, further, deductions disallowed on
alternative grounds; the shares were not publicly
traded securities, so that the substantiation
requirements were applicable but not satisfied.
- 2 -
Richard C. Kaufman, for petitioners.
Frederick J. Lockhart, Jr., for respondent.
HALPERN, Judge: By notice of deficiency dated August 13,
1999 (the notice), respondent determined deficiencies in
petitioners’ Federal income tax liabilities for petitioners’
taxable (calendar) years 1994 through 1997 (the audit years) of
$14,181, $61,540, $88,832, and $33,971, respectively. Among the
adjustments giving rise to respondent’s determination of
deficiencies is respondent’s disallowance of deductions for
charitable contributions petitioners claimed for each of the
audit years (the disallowed deductions). Petitioners have
assigned error only with respect to that disallowance.
Accordingly, we need decide only whether petitioners are entitled
to the disallowed deductions, all other adjustments being deemed
conceded by petitioners. See Rule 34(b)(4).
Unless otherwise noted, all section references are to the
Internal Revenue Code in effect for the years in issue, and all
Rule references are to the Tax Court Rules of Practice and
Procedure. Petitioners bear the burden of proof. See Rule
142(a).
- 3 -
FINDINGS OF FACT
Some facts have been stipulated and are so found. The
stipulations of facts, with accompanying exhibits, are
incorporated herein by this reference.
Residence
Petitioners resided in Greeley, Colorado, at the time the
petition was filed.
The Foundation and Contribution Thereto
On December 20, 1994, petitioners formed the Todd Family
Foundation (the foundation), a Colorado nonprofit corporation.
On December 27, 1994, petitioner John C. Todd (petitioner)
transferred 6,350 shares of stock (the transfer date, the
transfer, and the shares, respectively) in Union Colony Bancorp
(Bancorp), a Colorado corporation, to the foundation. On the
transfer date, the foundation was a private foundation (as
defined in section 509(a)), other than a private foundation
described in section 170(b)(1)(E).
Petitioners’ Tax Returns
Petitioners filed a Form 1040, U.S. Individual Income Tax
Return (the Form 1040), for 1994. In calculating their taxable
income shown on the Form 1040, petitioners claimed a deduction
for a charitable contribution on account of the transfer.
Attached to the Form 1040 is a Form 8283, Noncash Charitable
Contributions (the Form 8283), on which petitioners provided
- 4 -
information concerning the transfer, including petitioners’ “cost
or adjusted basis” in the shares, $33,338, the fair market value
of the shares, $553,847, and a statement of the method used to
determine the fair market value: “Sales of other shares at same
time”. The portion of the Form 8283 that provides for the
certification of an appraiser is without entries. No appraisal
summary with respect to the shares is attached to the Form 8283
or otherwise included with the Form 1040. Because of
contribution limitations, petitioners claimed a deduction on the
Form 1040 on account of the transfer in the amount of $88,879.
They claimed additional deductions of $152,692, $221,066, and
$56,906 on their 1995, 1996, and 1997 income tax returns,
respectively.
Sale of the Shares
The statement on the Form 8283 that the fair market value of
the shares was $553,847 is based on the foundation’s sale of the
shares (for that amount) on January 5, 1995, to First National of
Nebraska, Inc., a Nebraska corporation, pursuant to an agreement
of merger involving Bancorp.
Bancorp and the Bank
On the transfer date, Bancorp was a bank holding company,
owning all of the issued and outstanding shares of stock of Union
Colony Bank, Greeley, Colorado, a state-chartered Colorado bank
(the bank). On that date, shares of Bancorp were not listed on
- 5 -
the New York Stock Exchange, the American Stock Exchange, or any
city or any regional stock exchange, nor were the shares
regularly traded in the national or any regional over-the-counter
(OTC) market for which published quotations are available. The
shares were not shares of an open-end investment company
(commonly know as a mutual fund), as provided in section 1.170A-
13(c)(7)(xi)(A)(3), Income Tax Regs.
Procedure for Purchase or Sale of Shares of Bancorp
Before and throughout 1994, the procedure for someone
wishing to purchase or sell shares of Bancorp was to contact an
officer of the bank or a local stockbroker specializing in the
shares of Bancorp. The bank or broker would try to match a
potential seller with a potential buyer. That could prove
difficult, since Bancorp shares were not frequently sold. The
bank maintained a numerical list, by certificate number, of all
share transactions (the bank’s list). The bank’s list showed the
date, seller, buyer, number of shares, share cost (if available),
and certificate number. Gill & Associates, Inc. (Gill &
Associates), a member of the National Association of Securities
Dealers since 1984, acted as a placement agent or “matchmaker”
for certain of the sales of the shares. As a matchmaker, Gill &
Associates maintained a list of individuals wishing to purchase
shares and contacted these individuals when approached by others
interested in selling shares. In order to quote a price to an
- 6 -
interested purchaser, a representative from Gill & Associates
would call the bank to obtain the net asset value on the books of
the corporation. Gill & Associates believed the book value was a
fair value for the stock of Bancorp, and it used the book value
to compute what it believed was a fair price for a share of
Bancorp. Gill & Associates did not have access to the bank’s
list. Although Gill & Associates could readily quote to an
interested buyer what it believed to be a fair price for Bancorp
shares, Bancorp shares were not necessarily then available for
sale. If no shares were available, Gill & Associates would put
the interested person’s name on a list and contact that person
when shares became available. On six to eight occasions during
the 10-year period from 1984 through 1994, when Bancorp shares
became available for sale, Gill & Associates would place an
advertisement, for a brief period, in the local newspaper. Gill
& Associates charged a fee of 25 cents for each share placed, and
acted as placement agent as an accommodation to the bank, to
encourage its business relationship with the bank.
On December 1, 1994, eight individuals, including
petitioner, owned or controlled 50.5 percent of the issued and
outstanding shares of Bancorp. Petitioner owned or controlled
7 percent of those shares.
- 7 -
Respondent’s Adjustments
In determining the deficiencies here in question, respondent
disallowed all of the deductions claimed by petitioners on
account of the transfer except for $33,338 (petitioner’s cost
basis in the shares), which respondent allowed for 1994.
Respondent explained his disallowance on the basis that
petitioners had failed to establish that any of the amounts
disallowed met the requirements of section 170, which allows a
deduction for charitable contributions.
OPINION
I. Introduction
On December 27, 1994 (the transfer date), petitioner
transferred 6,350 shares of Bancorp (the shares) to the
foundation, claiming charitable contribution deductions on
account thereof on petitioners’ 1994 through 1997 income tax
returns. Respondent disallowed all those deductions except that
he allowed a charitable contribution deduction equal to
petitioner’s cost basis in the shares, $33,338, for 1994.
Petitioners have assigned error to respondent’s determination of
deficiencies to the extent that respondent disallowed
petitioners’ claimed charitable deductions (the disallowed
deductions). In support of their assignment of error,
petitioners aver: “Pursuant to I.R.C. §§ 170(a) and 170(e)(5)(A)
and (B), Petitioners properly took the charitable deduction to
- 8 -
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:
- 9 -
SEC. 170. CHARITABLE, ETC., CONTRIBUTIONS AND GIFTS.
(a) Allowance of Deduction.--
(1) General rule.–-There shall be allowed as a
deduction any charitable contribution * * *
payment of which is made within the taxable year.
A charitable contribution shall be allowable as a
deduction only if verified under regulations
prescribed by the Secretary.
In pertinent part, section 170(e) provides:
SEC. 170(e). Certain Contributions of Ordinary
Income and Capital Gain Property.--
(1) General rule.–-The amount of any
charitable contribution of property otherwise
taken into account under this section shall be
reduced by the sum of–-
* * * * * * *
(B) in the case of a charitable contribution--
* * * * * * *
(ii) to or for the use of a private
foundation (as defined in section 509(a)),
other than a private foundation described
in subsection (b)(1)(E),
the amount of gain which would been long-term
capital gain if the property contributed had
been sold by the taxpayer at its fair market
value (determined at the time of such
contribution).
* * * * * * *
(5) Special rule for contributions of stock
for which market quotations are readily
available.--
(A) In general.–-Subparagraph (B)(ii)
of paragraph (1) shall not apply to any
ontribution of qualified appreciated stock.
- 10 -
(B) Qualified appreciated stock.--* * *
for purposes of this paragraph, the term
“qualified appreciated stock” means any stock
of a corporation--
(i) for which (as of the date of the
contribution) market quotations are readily
available on an established securities
market, and
(ii) which is capital gain property (as
defined in subsection (b)(1)(C)(iv)).
B. Regulations
Section 1.170A-13, Income Tax Regs., sets forth record
keeping and return requirements for deductions for charitable
contributions. Paragraph (c) thereof applies to charitable
contributions made after December 31, 1984, by, among others, an
individual of an item of property “other than money and publicly
traded securities to which § 1.170A-13(c)(7)(xi)(B) does not
apply” if the amount claimed or reported as a deduction with
respect to the property exceeds $5,000. Paragraph (c) further
provides: “No deduction under section 170 shall be allowed with
respect to a charitable contribution to which this paragraph
applies unless the substantiation requirements described in
paragraph (c)(2) of this section are met.” In pertinent part,
section 1.170A-13(c)(2)(i), Income Tax Regs., provides:
(2) Substantiation requirements. (i) In general.
* * * a donor who claims or reports a deduction with
respect to a charitable contribution to which this
paragraph (c) applies must comply with the following
three requirements:
- 11 -
(A) Obtain a qualified appraisal (as defined in
paragraph (c)(3) of this section) for such property
contributed. If the contributed property is a partial
interest, the appraisal shall be of the partial
interest.
(B) Attach a fully completed appraisal summary (as
defined in paragraph (c)(4) of this section) to the tax
return * * * on which the deduction for the
contribution is first claimed (or reported) by the
donor.
(C) Maintain records containing the information
required by paragraph (b)(2)(ii) of this section.
Among the requirements set forth in section 1.170A-13(c)(3),
Income Tax Regs., for a qualified appraisal are that it be made
not earlier than 60 days prior to the date of the contribution,
be prepared, signed and dated by a qualified appraiser, contain
the qualifications of the qualified appraiser, contain a
statement that it was prepared for income tax purposes, show the
date on which the property was appraised, show the fair market
value of the property on the date of contribution, and show the
method of valuation and the specific basis for the valuation.
Among the requirements set forth in section 1.170A-13(c)(4),
Income Tax Regs., for an appraisal summary are that it be signed
and dated by the donee and the appraiser on a form prescribed by
the Internal Revenue Service and that it contain certain
information. The information required includes a description of
the property, the manner and date of the property’s acquisition
by the donor, the date of the receipt of the property by the
donee, the donor’s cost for the property and the appraised fair
- 12 -
market value of the property on the date of contribution,
information identifying the donor and donee, information
identifying the qualified appraiser signing the appraisal
summary, and a prescribed appraiser declaration.
Among the records retention requirements set forth in
section 1.170A-13(b)(2)(ii), Income Tax Regs., is that, if the
value of the contributed property was determined by appraisal, a
copy of the signed appraisal report be retained.
The term “publicly traded securities” is defined for
purposes of section 1.170A-13(c), Income Tax Regs., in
subparagraph (7)(xi) thereof. In pertinent part, that definition
is as follows:
(xi) Publicly traded securities. (A) In general.
* * * the term “publicly traded securities” means
securities * * * for which (as of the date of the
contribution) market quotations are readily available
on an established securities market. For purposes of
this section, market quotations are readily available
on an established securities market with respect to a
security if:
(1) The security is listed on the New York Stock
Exchange, the American Stock Exchange, or any city or
regional exchange in which quotations are published on
a daily basis, including foreign securities listed on a
recognized foreign, national, or regional exchange in
which quotations are published on a daily basis;
(2) The security is regularly traded in the
national or regional over-the-counter market, for which
published quotations are available; or
(3) The security is a share of an open-end
investment company (commonly known as a mutual fund)
registered under the Investment Company Act of 1940, as
amended (15 U.S.C. 80a-1 to 80b-2), for which
- 13 -
quotations are published on a daily basis in a
newspaper of general circulation throughout the United
States.
(If the market value of an issue of a security is
reflected only on an interdealer quotation system, the
issue shall not be considered to be publicly traded
unless the special rule described in paragraph
(c)(7)(xi)(B) of this section is satisfied.)
III. Discussion
A. Introduction
Petitioners are not entitled to the disallowed deductions if
the shares were not, on the transfer date, “qualified appreciated
stock” (qualified appreciated stock), within the meaning of
section 170(e)(5)(B). If the shares were not qualified
appreciated stock, then, because there is no dispute that the
shares were contributed to a private foundation (other than a
private foundation described in section 170(b)(1)(E)),
petitioners’ deduction on account of the transfer cannot exceed
$33,338.1 Alternatively, petitioners are not entitled to the
disallowed deductions if they are subject to, and failed to
satisfy, the substantiation requirements set forth in section
1.170A-13(c)(2)(i), Income Tax Regs. (the substantiation
requirements).2
1
There is no dispute that the shares were capital assets
in petitioner’s hands and that his adjusted basis in the shares
was $33,338.
2
Pursuant to sec. 1.170A-13(c)(1)(i), Income Tax Regs., if
the substantiation requirements are not satisfied (and a
(continued...)
- 14 -
There is a common denominator for determining whether the
shares were qualified appreciated stock on the transfer date and
whether petitioners are subject to the substantiation
requirements. That common denominator is whether, on the
transfer date, market quotations with respect to the shares were
readily available on an established securities market. See sec.
170(e)(5)(B)(i); sec. 1.170A-13(c)(7)(xi)(A), Income Tax Regs.3
Because we find that, on the transfer date, market quotations
with respect to the shares were not readily available on an
established securities market, (1) the shares were not qualified
appreciated stock, (2) petitioners are subject to the
substantiation requirements (which they failed to satisfy), and
(3) as a result of either (1) or (2), or both, they are not
entitled to the disallowed deductions.
2
(...continued)
deduction in excess of $5,000 is claimed), no deduction is
allowable. Respondent has, however, in effect, allowed a
deduction of $33,338 for 1994. See supra, Respondent’s
Adjustments. We have accepted such a concession in the past.
Hewitt v. Commissioner, 109 T.C. 258, 266 (1997), affd. without
published opinion 166 F.3d 332 (4th Cir. 1998).
3
The substantiation requirements apply unless, on the
transfer date, the shares were “publicly traded securities to
which § 1.170A-13(c)(7)(xi)(B) does not apply”. See sec. 1.170A-
13(c)(1)(i), Income Tax Regs. That condition is met only if, on
the transfer date, with respect to the shares, market quotations
were readily available on an established securities market,
without application of the special rule found in subdiv. (B) of
sec. 1.170A-13(c)(7)(xi), Income Tax Regs., and subject to the
exception set forth in subdiv. (C) thereof. See sec. 1.170A-
13(c)(7)(xi)(A), Income Tax Regs.
- 15 -
B. Disagreement
The disagreement between the parties is over the meaning of
the requirement (sometimes, the market quotations requirement)
that “market quotations * * * [be] readily available on an
established securities market”. Petitioners argue for a “plain
language” reading of the requirement. They rely on the testimony
of their expert witness, Eugene N. White, Ph.D., who was accepted
by the Court as an expert in banking and securities markets, and
who was of the opinion that Bancorp stock was traded on the OTC
market, which is an established part of the securities market, so
that Bancorp stock “qualifies as a security that was traded on an
established securities market”. Petitioners argue that, on the
transfer date, market quotations were readily available for the
shares since, on that date, if requested, Gill & Associates could
have readily determined the book value of the bank’s assets,
which it believed to be a fair value for Bancorp’s stock.
Respondent argues that the market quotations requirement was
not satisfied because, on the transfer date: (1) Bancorp shares
did not trade on, and therefore, did not have market quotations
on, an established securities market, and (2) even if Bancorp
shares did so trade, market quotations with respect to those
shares were not readily available. With respect to whether the
shares constituted qualified appreciated stock, respondent
summarizes his argument as follows:
- 16 -
The evidence adduced at trial reveals that Bancorp
stock was traded by a single broker; stock quotations
could be obtained only from that broker; during a ten-
year period, the broker advertised the Bancorp stock
only six or eight times, in a newspaper of local
circulation; and only the issuer of the stock
maintained records of sales transactions. In view of
these facts, treating the Bancorp stock as qualified
appreciated stock would not be consistent with the
expressed intention of Congress to limit the exception
for qualified appreciated stock to “certain situations
in which the potential for abuse, including
overvaluation, is minimized.” * * *
Respondent points out that petitioners concede that the
shares were not part of an issue of securities that satisfied any
of the circumstances described in section 1.170A-13(c)(7)(xi)(A),
Income Tax Regs.
C. Discussion
1. Tax Reform Act of 1984
We begin with an examination of two sections of the Tax
Reform Act of 1984 (Tax Reform Act of 1984 or TRA), Division A of
the Deficit Reduction Act of 1984, Pub. L. 98-369, 98 Stat. 494.
The first section is TRA section 155, 98 Stat. 691, which gives
rise to the substantiation requirements and, in subsection
(a)(6)(C), defines the term “publicly traded securities” to mean
“securities for which (as of the date of the contribution) market
quotations are readily available on an established securities
market”.4 The second section is TRA section 301(b), 98 Stat.
4While TRA sec. 155 gives rise to the substantiation
requirements, it does not impose them, but directs the Secretary
(continued...)
- 17 -
778, which adds to the Internal Revenue Code section 170(e)(5),
which contains the term “qualified appreciated stock” and, in
pertinent part, defines that term as “any stock of a corporation
for which (as of the date of the contribution) market quotations
are readily available on an established securities market”.
The legislative history of both TRA provisions informs us
that, with respect to each, Congress’s purpose was to combat
inflated deductions resulting from the overvaluation of property
contributed to charities. In Hewitt v. Commissioner, 109 T.C.
258, 261-262, 265 (1997), affd. without published opinion
166 F.3d 332 (4th Cir. 1998), we reviewed the history of TRA
section 155 and stated:
[I]t is clear that the principal objective of * * *
[TRA] section 155 was to provide a mechanism whereby
respondent would obtain sufficient return information
in support of the claimed valuation of charitable
contributions of property to enable respondent to deal
more effectively with the prevalent use of
overvaluations.
H.R. 4170, 98th Cong., 2d Sess. (1984), is the bill that,
when enacted, included the Tax Reform Act of 1984. H. Rept. 98-
432 (Part 2) (1984) is the supplemental report of the Committee
on Ways and Means on H.R. 4170. With respect to the reason for
adding section 170(e)(5) to the Internal Revenue Code, the report
4
(...continued)
to prescribe the requirements by regulation. TRA sec. 155(a)(1);
see Hewitt v. Commissioner, supra at 261-262. Sec. 1.170A-13(c),
Income Tax Regs., contains that prescription.
- 18 -
states the Committee on Ways and Means’ belief: “[T]hat
deductibility at full fair market value for gifts of appreciated
stock to private nonoperating foundations should be permitted in
certain situations in which the potential for abuse, including
overvaluations, is minimized.” Id. at 1464.
The rebuttable presumption of formal consistency is a
presumption applicable in the interpretation of statutes. The
presumption is that, when the drafter of a legal document uses
the same language in more than one portion of the same document,
a court may presume a consistency of meaning. See Dickerson, The
Interpretation and Application of Statutes 224 (1975). Congress
used the same language to express the market quotations
requirement in TRA sections 155 and 301. Nothing here leads us
to believe that Congress intended inconsistent meanings, and the
commonality of legislative purpose leads us to believe that a
consistent meaning was intended. We conclude that the market
quotations requirement has the same meaning for the purpose of
defining qualified appreciated stock and in determining when
securities are publicly traded (so as to exempt a donor from the
substantiation requirements).
2. Market Quotations Requirement
In general, if a charitable contribution is made in property
other than money, the amount of the contribution is the fair
market value of the property at the time of the contribution.
- 19 -
Sec. 1.170A-1(c)(1), Income Tax Regs. Fair market value is the
price at which the property would change hands between a willing
buyer and a willing seller, neither being under any compulsion to
buy or sell and both having reasonable knowledge of the relevant
facts. Sec. 1.170A-1(c)(2), Income Tax Regs. The fair market
value of a share of stock or a security is not necessarily equal
to its market quotation. See sec. 1.170A-13(c)(7)(xi)(D), Income
Tax Regs. Nevertheless, we assume that Congress believed that
the existence of readily available market quotations would
substantially assist in, if not determine, fair market valuation
(and discourage overvaluation). We do not agree with petitioners
that the market quotations requirement was met because Bancorp
shares were occasionally traded by Gill & Associates, who could
provide a suggested share price based on the net asset value of
the bank. Such share price did not necessarily reflect a price
that any willing buyer or seller had accepted or would accept.
Gill & Associates charged a flat fee of 25 cents for each share
traded, and acted as a placement agent as an accommodation to the
bank, to encourage its business relationship with the bank. We
do not accept Gill & Associates’ procedures for quoting prices as
a reliable proxy for fair market valuation. The intendment of
the market quotations requirement would not be served by
accepting procedures such as those followed by Gill & Associates
with respect to Bancorp shares as satisfying the requirement.
- 20 -
3. Section 1.170A-13(c)(7)(xi)(A), Income Tax Regs.
Section 1.170A-13(c)(7)(xi)(A), Income Tax Regs., describes
circumstances in which the market quotations requirement is met
for purposes of exempting contributions of certain publicly
traded securities from the substantiation requirements. See sec.
1.170A-13(c)(1)(i), Income Tax Regs. Section 1.170A-
13(c)(7)(xi)(A), Income Tax Regs., does not purport to be
applicable to the interpretation of the term “qualified
appreciated stock”. Nevertheless, given our conclusion as to the
consistent meaning of the market quotations requirement, we
believe that section 1.170A-13(c)(7)(xi)(A), Income Tax Regs.,
also describes circumstances in which the market quotations
requirement is met for the purpose of determining whether the
shares constituted qualified appreciated stock.5
In the petition, petitioners aver that the market quotations
requirement was satisfied by virtue of the Bancorp shares’
satisfying either subdivision (1) or (2) of section 1.170A-
13(c)(7)(xi)(A), Income Tax Regs. During the trial of this case,
however, petitioners conceded that, on the transfer date, the
Bancorp shares did not satisfy any of the subdivisions of section
5
We need not be concerned with the special rule provided
in sec. 1.170A-13(c)(7)(xi)(B), Income Tax Regs., which applies,
among other conditions, only if the issue of a security in
question is regularly traded in a market that is reflected by the
existence of an interdealer quotations system for the issue.
That condition was not here met. See sec. 1.170A-
13(c)(7)(xi)(B)(2)(ii), Income Tax Regs.
- 21 -
1.170A-13(c)(7)(xi)(A), Income Tax Regs. Petitioners rely on
their plain language reading of the market quotations requirement
and argue that the regulation is invalid because inconsistent
with that reading. Since we reject petitioners’ plain language
reading, we reject petitioners’ argument based on that reading,
that the regulation is invalid.
Petitioners have failed to satisfy the market quotations
requirement for purposes of determining whether the shares were
(1) publicly traded so as to be exempt from the substantiation
requirements and (2) qualified appreciated stock.
4. Substantiation Requirements
Petitioners have failed to show that they complied with the
three substantiation requirements specified in section 1.170A-
13(c)(1), Income Tax Regs. First, there is no evidence that they
met the requirements specified in section 1.170A-13(c)(3), Income
Tax Regs., for a qualified appraisal. Second, no appraisal
summary is attached to the Form 8283 submitted with the Form
1040, as required by section 1.170A-13(c)(2)(B), Income Tax Regs.
Third, there is no evidence that they maintained records
containing the information required by section 1.170A-
13(b)(2)(ii), Income Tax Regs.
We find that petitioners failed to meet the substantiation
requirements. Accordingly, except with respect to the $33,338
respondent allowed for 1994, no charitable deductions are allowed
- 22 -
to them on account of the transfer of the shares to the
foundation. See sec. 1.170A-13(c)(1)(i), Income Tax Regs.
5. Qualified Appreciated Stock
Since the shares were not qualified appreciated stock,
petitioners’ deduction on account of the transfer is, for a
second reason, limited to $33,338.
IV. Conclusion
Respondent has prevailed on the only issue for decision.
Petitioners are not entitled to the disallowed deductions.
Decision will be entered
for respondent.