Producing Deconstruction Appraisals That Hold Up Under IRS Review

Personal Property Appraisal

June 8, 2026 Jessica I. Marschall

Four connected articles on methodology, precedent, the secondary market, and donor diligence in charitable deconstruction donations.

800+

verified secondary market sources

80-90

office hours per residential appraisal

2

Tax Court precedents every donor should know

100%

of the deduction is what is at stake

In This Edition

Part I. Anatomy of a Flawed Deconstruction Appraisal

What Donors and Their Advisors Should Look For in IRS Qualified Reports

Part II. Mann and Loube

What the Courts Actually Rejected in Deconstruction Appraisals

Part III. The Secondary Market Exists

Why Sales Comparison Remains the IRS Standard for Deconstruction Appraisals

Part IV. Protecting Your Deduction

A Donor’s Checklist for Vetting a Deconstruction Appraisal

PART I

Anatomy of a Flawed Deconstruction Appraisal

What Donors and Their Advisors Should Look For in IRS Qualified Reports

By Jessica I. Marschall, CPA, ISA AM | The Green Mission Inc. June 2026

Two Methodologies, Two Very Different Outcomes

Cost Approach Default

Construction estimating software

Time to Produce

Under 1 hour

Basis of Value

New cost minus flat depreciation

Secondary Market Research

None

Court Treatment

Rejected in Mann & Loube

Outcome on Audit

Deduction disallowed + penalties

Sales Comparison Approach

Documented comparable sales

Time to Produce

80 to 90 hours

Basis of Value

Arm's length comparable sales

Secondary Market Research

800+ verified sources

Court Treatment

Endorsed by the courts

Outcome on Audit

Deduction protected

Figure 1. The contrast at the center of every disallowed deconstruction appraisal.

Why Methodology Matters

Our team is often brought in by donors who have had their deconstruction donation audited and disallowed for various reasons, many of which are a result of the underlying appraisal’s deficiencies. We had another one arrive this week. Unfortunately, these cannot be remedied as non-cash donations fall under DEFRA compliance, which means you get one shot to hire an IRS Qualified Appraiser to produce an IRS Qualified Appraisal, ensure the nonprofit’s Contemporaneous Written Acknowledgment is complete and accurate, donation dates align, and Form 8283 completed correctly and completely. It is an incredibly high bar to ensure compliance.

A defensible deconstruction appraisal begins with an itemized list of property the donee will actually receive.

We bring this forward because the patterns we observe represent a recurring problem in the deconstruction appraisal industry. These patterns place clients, their CPAs, and their tax attorneys at significant risk of disallowance, accuracy related penalties under Section 6662, and appraiser penalties under Section 6695A. These same patterns have been directly rejected by the federal courts in Mann v. United States and Loube v. Commissioner.

Here are the five recurring patterns we see, why each one matters, and what a properly produced IRS qualified appraisal looks like instead.

1. The Cost Approach Applied as a Default

The Uniform Standards of Professional Appraisal Practice (USPAP) require an appraiser to consider all three approaches to value: the Sales Comparison Approach, the Cost Approach, and the Income Approach. For depreciating personal property removed from a deconstruction project, the Sales Comparison Approach is the appropriate method. It reflects what a willing buyer would pay a willing seller in the most active and relevant marketplace, which is precisely the Internal Revenue Service definition of Fair Market Value found in 26 C.F.R. 1.170A-1(c)(2).

Some of the appraisals we review use the Cost Approach for substantially the entire valuation. The justification offered was that no sales market exists for deconstructed building materials. That justification is contradicted by the abundance of comparable sales data available on the secondary retail and auction market, a topic we address in a companion article in this series.

2. Arbitrary Depreciation Applied to New Construction Costs

These appraisals often begin with new construction material pricing from a costing software product, then apply a flat depreciation factor on a stated economic life with a defined effective age. The resulting figure is then presented as Fair Market Value.

The Fourth Circuit Court of Appeals rejected this exact analytical sequence in Mann v. United States. In that case, the appraiser had applied a 17 percent depreciation factor to similarly derived new construction costs. The court characterized the assumption that the depreciated new construction cost represented current Fair Market Value as largely unexplained. The defect was the failure to tie the value of the donated material to any actual secondary market transactions.

3. Asserting That No Secondary Market Exists

Some appraisers argue that the market for used deconstruction materials is fractured and nascent and that the secondary market for construction and demolition materials is developing and uneven across regions. We agree with these critiques, however, the market exists. It is our theory that used building materials are generally undervalued compared to how we predict the value would develop should a functional secondary market emerge and solidify. Primarily there is too erratic and unreliable supply (especially of fungible materials like matching doors) and this leads to lack of consistent demand. This is especially evident in large-scale residential or commercial projects leading most reused materials to be incorporated into small renovations, rebuilds or one-off projects.

We maintain a proprietary database of more than 800 verified secondary market sources and hundreds of thousands of data points, including auction houses, architectural salvage retailers, reclaimed lumber dealers, and online marketplaces. Comparable sales for the categories typically donated in a residential deconstruction, including heart pine flooring, antique brick, salvaged windows and doors, kitchen cabinetry, appliances, period light fixtures, hardware, mantels, stair components, and plumbing fixtures, are routinely available, settled, and at arm’s length. But the value is typically well below the cost of new materials. Right now it is a buyer’s market. The buyer might just need to order from six different retailers and hope that the doors somewhat match and can be delivered to the job site in a set amount of time.

4. Misapplication of the Cost Segregation Methodology

We have noted that deconstruction appraisals sometimes reference Cost Segregation Studies as being equivalent to Fair Market Value. The Cost Segregation Audit Techniques Guide governs the allocation of acquisition cost among the components of newly constructed or recently acquired real property for purposes of depreciation under Sections 167 and 168 of the Internal Revenue Code. It is a tool for placing acquired property on a taxpayer’s depreciation schedule. It is not a Fair Market Value methodology, and the IRS has never represented it as one. Cost Segregation produces a cost basis allocation. Charitable contribution appraisals are required to produce Fair Market Value as defined in 26 C.F.R. 1.170A-1(c)(2). These are not interchangeable concepts.

5. Aggregating Components Not Actually Donated

The Mann court directed particular concern at appraisals that aggregate the value of every component of a structure, including foundation, framing, and drywall, when not every component is actually salvaged, donated, and accepted by the donee. The donation inventory must distinctly list the materials that were actually salvaged and, in a condition, suitable for reuse. For example, if cabinetry were ripped out in broken pieces it could not be valued as intact kitchen cabinetry. If interior features are removed and found to contain mold, they cannot be included on the donation inventory and are not included in value. Floor framing systems valued in square feet, partition framing systems, gable end roof framing, and similar in place structural assemblies are problematic. Donees rarely accept and rarely receive these items in full reusable form. Instead, when our team appraises these deconstructed elements, the donation is broken into structural lumber delineated by dimensions and captured in linear, board, or square feet depending upon how the deconstruction contractor salvages and measures.

What an IRS Qualified Appraisal Looks Like

A defensible deconstruction appraisal begins with an itemized list of property that the donee will actually receive. Each line item is researched against the secondary retail and auction market, with multiple comparable sales documented for each property type depending upon its complexity and value. There are confirmed prices similar to a Goodwill or Salvation Army price guide for smaller items like towel bars and simple door handles. Outlier sales are identified and excluded from valuations. Reconciliation is documented in narrative form. Where a particular line-item lacks settled secondary market data, the appraiser explains why and identifies the supplementary approach used, with full disclosure.

The result is a longer appraisal. It takes our team, by internal measurement, between 80 and 90 hours of office time for an average residential structure. A Cost Approach appraisal driven by construction estimating software can be produced in less than an hour. The cost to the taxpayer of the longer report is largely the same. The cost of the shorter report, in the event of audit, can be the entire deduction plus penalties. Our team often charges the same as other appraisal offices, resulting in significantly lower margins when the appraisals are produced accurately. Clients who receive multiple quotes often communicate that they receive another quote that is sometimes anywhere from $30,000 to $3,000,000 higher than ours. We refer potential clients to our website and articles on personal appraisal methodology and recommend their CPAs assist with determining the correct appraiser with whom to contract.

Closing Thoughts

The deconstruction tax deduction incentive is one of the few places in the Internal Revenue Code where good environmental practice and tax policy align directly. Protecting that incentive requires the industry to produce appraisals that hold up. When an appraisal cannot withstand IRS review, the donor pays the price, the deduction is lost, and the broader incentive is weakened for every future donor.

PART II

Mann and Loube

What the Courts Actually Rejected in Deconstruction Appraisals

By Jessica I. Marschall, CPA, ISA AM | The Green Mission Inc. June 2026

Two Cases, One Pattern

Two federal cases stand as the clearest precedents on how deconstruction appraisals should and should not be produced: Mann v. United States, decided by the United States District Court for the District of Maryland in 2019 and affirmed by the Fourth Circuit Court of Appeals in January 2021; and Loube v. Commissioner, T.C. Memo 2020-3, decided by the United States Tax Court. Both cases involved appraisals of materials removed from residential structures and donated to nonprofit recipients. Both cases resulted in disallowance of the deductions claimed. Both cases involved methodology that remains in use among some deconstruction appraisal providers today.

An appraisal can fail in more than one way at the same time.

Donors, CPAs, and tax attorneys involved in deconstruction projects should understand precisely what these courts held, what they rejected, and what they suggested as the proper alternative.

Mann v. United States: The Facts

The Manns donated a residential structure to a Maryland nonprofit in connection with a deconstruction project. The appraisal supporting their deduction concluded a Fair Market Value of $313,353 for the building’s components. The appraisal assumed that every component of the house would be severed and donated to the nonprofit for reuse. Because the appraiser took the position that many of those components lacked a resale market, the appraisal applied the Cost Approach.

The Cost Approach was implemented as follows. The appraiser determined the price of new and uninstalled versions of the building’s components, then depreciated that value by 17 percent, a factor derived from a stated 60 years of economic life and an effective age of 10. The result was aggregated across every component of the structure, including the foundation and the drywall.

The District Court Ruling

The district court found the appraisal deficient on several grounds. The court rejected the assumption that 10 year old installed components were worth 83 percent of their new and uninstalled value, calling that assumption largely unexplained. The court further found that aggregating the value of every component was inconsistent with the actual facts of the donation, given that not every component was severed, removed, and received by the donee. As the court put it, a valuation of over $300,000 based on the extraction and resale of all building materials does not properly value the donation in light of the conditions placed on the conveyance.

Critically, the court identified what a proper valuation would have looked like. The proper way, the court explained, would have been a valuation based on the resale value of the specific building materials and contents that the donee actually removed from the premises. The court endorsed, in substance, the Sales Comparison Approach applied to the actual donated property.

The Fourth Circuit Affirmance

The Fourth Circuit affirmed in January 2021. The appellate court held that the appraisal failed to qualify as a qualified appraisal under 26 U.S.C. Section 170(f)(11)(C) and 26 C.F.R. Section 1.170A-13(c)(3)(ii)(I). The deduction was disallowed in full.

The takeaway from Mann is not that the Cost Approach is universally inappropriate. The takeaway is that the Cost Approach cannot be used to mask the absence of secondary market research, and the unexplained application of a depreciation factor to new construction costs is not a substitute for the documented comparable sales required by the IRS definition of Fair Market Value.

Loube v. Commissioner: The Facts

In Loube v. Commissioner, T.C. Memo 2020-3, the Tax Court considered a substantially similar set of facts. The donor had engaged the same nonprofit and the same appraiser as in Mann. The appraisal was produced using construction estimating software, similar to the methodology rejected in Mann.

The Tax Court disallowed the deduction. The basis stated in the opinion was the donor’s failure to complete IRS Form 8283 in a manner that satisfied the qualified appraisal substantiation requirements, which fall under “DEFRA”. The court did not have to reach the underlying valuation question. The Form 8283 deficiency was sufficient to dispose of the case.

What the Cases Share in Common

Both cases involved Cost Approach methodology implemented through construction estimating software.
Both involved aggregation of components without verification that each component was actually donated and received.
Both cases ended with the taxpayer losing the entire deduction.

Both cases also share a positive teaching. The district court in Mann told the appraisal community what a proper methodology would have looked like: a Sales Comparison Approach applied to the property actually severed, removed, and received by the donee. The IRS, at its administrative level and at industry presentations, has repeated this position consistently in the years since.

Why These Precedents Matter for Every Donor

When an appraiser today produces a deconstruction appraisal that relies on construction estimating software, applies a flat depreciation factor, asserts that no secondary market exists, and aggregates components without verifying actual donation, the donor is paying for an appraisal that has been litigated and disallowed. The legal vulnerability is not theoretical. It is documented in published federal court opinions.

Conversely, a donor receiving an IRS Qualified Appraisal by an IRS Qualified Appraiser, using primarily the Sales Comparison Approach, with documented comparable sales for each line item, an itemized list reconciled to what the donee actually received, and a fully and correctly completed Form 8283, is protected by precedent that points directly toward what the courts and the IRS have asked for.

PART III

The Secondary Market Exists

Why Sales Comparison Remains the IRS Standard for Deconstruction Appraisals

By Jessica I. Marschall, CPA, ISA AM | The Green Mission Inc June 2026.

The Limited Market Claim

A recurring assertion in deficient deconstruction appraisals is that no settled, arm’s length secondary market exists for used building materials, and that, as a consequence, the appraiser is justified in turning to the Cost Approach for the entirety of the valuation. This assertion functions as the linchpin of the methodology rejected in Mann v. United States. If accepted, it permits the appraiser to value salvaged property by reference to new construction costs minus an arbitrary depreciation factor. If rejected, the entire valuation falls.

A developing market is not an absent market.

We respectfully reject the claim, and we have done so consistently in our published work since 2019 when we opened The Green Mission Inc. The secondary market for deconstructed building materials, while regionally uneven and still developing in some categories, generates the consummated arm’s length transactions required to support Sales Comparison appraisals for the substantial majority of property typically donated in a residential or commercial deconstruction.

What the Studies Actually Say

Some studies are cited in support of the limited market claim do not, on careful reading, support the conclusion drawn from them. The EPA Construction and Demolition Materials Scoping Study, the Army Corps of Engineers Study of Markets, and the Delta Institute Market Assessment all describe a developing, fragmented, and regionally uneven secondary market. They document that the share of construction and demolition waste currently flowing into reuse remains small relative to the total volume generated. None of them states that arm’s length sales of deconstructed materials do not occur, and none of them states that the volume of available comparable sales data is insufficient to support appraisal work.

A developing market is not an absent market. The IRS definition of Fair Market Value found in 26 C.F.R. 1.170A-1(c)(2) requires a willing buyer, a willing seller, neither under compulsion, both reasonably informed. The IRS does not require that a market be saturated, mature, or efficient. It requires that arm’s length transactions for similar property occur with sufficient frequency to support comparison.

What the IRS Defines as the Relevant Market

Treasury Regulations 20.2031-1(b) and 25.2512-1, applied by analogy to charitable contribution appraisals per Anselmo v. Commissioner, instruct the appraiser to value property in the market in which it is most commonly sold to the public. For salvaged building materials, that market is the architectural salvage retail and auction market. It is not the new construction wholesale market. It is not the original retail market for newly manufactured material. The appraiser’s task is to research and document transactions in the correct market, not to argue that the correct market does not exist.

A Verified Secondary Market Network

Our firm maintains a proprietary database of more than 800 verified secondary market sources used in deconstruction appraisal work. The sources include:

Regional and national architectural salvage retailers
Online auction platforms with searchable settled sales history
Specialty reclaimed lumber dealers
Antique brick, stone, and slate suppliers
Vintage hardware and lighting retailers
Appliance resale and refurbishment platforms
Estate auction houses with online catalog archives
Trade publications and price guides published by appraisal organizations

This database is the foundation of our appraisal work. Each property type donated in a typical residential deconstruction maps to documented sales in one or more of these sources. The appraiser’s role is to identify the most comparable settled transactions, firm offers of sale, exclude outliers, and reconcile the resulting data points into a defensible opinion of value for the specific property being appraised.

Categories That Reliably Generate Comparable Sales

In practice, the following property categories produce abundant settled comparable sales data:

Heart pine, oak, and other antique flooring
Solid wood interior and exterior doors with original hardware
Period windows, including divided light and stained glass
Kitchen cabinetry, particularly custom built and inset styles
High end appliances, both contemporary and vintage
Period light fixtures, sconces, and chandeliers
Mantels, both wood and stone
Stair components, including newels, balusters, and treads
Antique brick, hand made and Chicago common varieties
Stone pavers, slate roofing, terracotta tile
Plumbing fixtures, including clawfoot tubs and pedestal sinks
Mouldings, trim, and built ins
Door, drawer, and window hardware

For each category, our team can typically identify three or more settled or firm offers of arm’s length comparable sales within an appropriate time and geographic range. Where regional pricing variation exists, the analysis adjusts for that variation explicitly rather than concealing it within a depreciation factor.

When the Cost Approach Has Limited Application

We do not contend that the Cost Approach has no place in deconstruction appraisal. There are narrow circumstances in which it may be the appropriate supplementary method:

Custom or one of a kind architectural elements with no reasonable secondary market analog
Highly localized hand-crafted materials produced for the specific property
Recently manufactured materials of standard type where reproduction cost approximates resale value within an established tolerance

In each of these circumstances, the appraiser must explain the limited applicability, demonstrate the absence of comparable sales for the specific item, and document the depreciation factor with reference to observed market behavior, not by reference to a generic age life table. Where these conditions are met, the Cost Approach can be a supplementary tool. It is not, and has never been, a substitute for the Sales Comparison Approach across the bulk of a residential or commercial deconstruction donation.

Closing Thoughts

The appraisal industry’s resort to the Cost Approach as a default methodology for deconstruction donations is not, in our view, a function of market unavailability. It is a function of the time required to perform the Sales Comparison work correctly and aggregate value. A Cost Approach appraisal driven by construction estimating software can be produced in under an hour. A Sales Comparison appraisal for an average residential structure takes our team between 80 and 90 hours.

When we provide quotes and complete appraisals compared to quotes and valuations using cost estimating software, our concluded values are often only 50-75% of the value using cost estimating software. It can be tempting to go with the higher value. We hope our research and reasoning can persuade taxpayers that donating and procuring an accurate appraisal by an IRS Qualified Appraiser protects their deduction.

Regardless of the appraiser and the methodology used, the taxpayer pays roughly the same fee in either case. The taxpayer absorbs entirely different risk. We continue to advocate for the methodology the IRS asks for, the methodology the federal courts have endorsed, and the methodology that protects the deduction at the time it matters most, when it is examined.

PART IV

Protecting Your Deduction

A Donor’s Checklist for Vetting a Deconstruction Appraisal

By Jessica I. Marschall, CPA, ISA AM | The Green Mission Inc. May 2026

Why This Checklist Exists

Most donors who undertake a deconstruction project do so once or twice in a lifetime. The deduction is significant. The methodology is technical. The legal precedent has been litigated against donors more often than the public realizes. This checklist is designed to give the donor and the donor’s CPA or tax attorney a concrete set of questions to ask before engagement, during the project, and on receipt of the draft appraisal. Each item ties back to a specific requirement in the Code, the Treasury Regulations, USPAP, or the precedent set in Mann v. United States and Loube v. Commissioner.

The deduction is real. The methodology to support it is well established.

Before Engagement

Before signing an engagement letter with any deconstruction appraiser, the donor should confirm the following:

The appraiser is an accredited member of one of the three personal property sponsoring organizations of The Appraisal Foundation: American Society of Appraisers (ASA), Appraisers Association of America (AAA), or International Society of Appraisers (ISA). Simple membership is not the same as accreditation.
The appraiser holds a post 2018 accreditation that required a college degree, or alternatively documents the basis on which grandfathered status was granted.
The appraiser has experience with deconstruction donations specifically, not solely with general personal property appraisal.
The appraiser is willing to provide a sample appraisal report, redacted as necessary, that demonstrates the methodology, level of detail, and substantiation typical of their work.
The sample report applies the Sales Comparison Approach as the primary methodology, with documented comparable sales for each line item of significant value.
The appraiser maintains, or has access to, a documented secondary market source database, and is willing to explain the categories of sources relied upon.
The appraiser has not been disciplined by, or had findings entered against them by, the appraisal organization granting accreditation.

During the Inspection

During the on site inspection, the donor or the donor’s representative should confirm:

The appraiser, or a credentialed member of the appraiser’s team, physically inspects the property either in person or through photographs for a “Desktop Appraisal”. It is estimated that approximately 90% of appraisals can be produced with adequate photographs.
The inspection produces an itemized list of property to be donated, with measurements, quantities, and condition notes for each line item.
The list is shared with the deconstruction contractor and the donee for confirmation prior to finalization.
Photographs are taken of each category of donated property, cross referenced to the itemization.
Categories of property unlikely to be salvaged, removed, and accepted by the donee are excluded from the list at this stage, not aggregated into a generalized square footage estimate.

Reviewing the Draft Appraisal

When the draft appraisal is delivered, the donor and the donor’s CPA or tax advisor should verify:

The appraisal contains a complete itemization of property donated, with each line item supported by photographs and comparable sales data.
The primary valuation methodology disclosed in the report is the Sales Comparison Approach. If the Cost Approach is used for any portion of the valuation, the appraiser explains, on the record, why settled comparable sales were unavailable for that specific item. The Income Approach has never been used for deconstructed materials in our 6 ½ years of operations.
The appraiser provides at least comparable sales for each material category depending upon the complexity and value and can reference values from the secondary market.
Outlier comparable sales (significantly above or below the central tendency of the data) are either excluded or identified and explained.
The appraisal includes a complete and current CV for the appraiser, demonstrating accreditation status, educational background, and relevant experience.
The appraisal is dated within 60 days of the donation date, consistent with 26 C.F.R. 1.170A-13(c)(3)(iv).
The appraisal includes the statements required by USPAP and the Treasury Regulations, including the statement that the appraiser has not been barred from practice before the Treasury under 31 U.S.C. 330(c).
The reported value is reconciled across approaches to value where more than one approach is considered.

Confirming Form 8283 Compliance

This step is critical. The Loube case turned entirely on Form 8283 deficiencies, even though the underlying methodology was also questionable. The taxpayer and their CPA must verify:

Section B is completed in full for any non-cash donation of property valued above $5,000.
The donor’s portion of Section B, Part I (Information on Donated Property) is completed in detail, with description, condition, acquisition information, and cost basis where required.
The appraiser has completed and signed Section B, Part IV (Declaration of Appraiser).
The donee has completed and signed Section B, Part V (Donee Acknowledgment).
The signed and completed Form 8283 is attached to the donor’s federal income tax return for the year in which the deduction is claimed.
For any donation exceeding $500,000, the qualified appraisal itself is attached to the return.

Red Flags That Should Halt the Engagement

If any of the following appears in the draft appraisal or in the appraiser’s representations, the donor should pause and obtain a second opinion before filing:

The appraisal relies primarily on construction estimating software such as R.S. Means or Marshall and Swift.
The appraisal applies a flat depreciation factor (commonly 17 to 35 percent) across all donated property.
The appraisal asserts that no settled secondary market exists for deconstructed materials.
The appraisal aggregates components by square footage rather than by itemized donation list.
The appraisal includes structural components (foundation, framing, drywall) without specific evidence that those components were severed, removed, and received by the donee.
The appraiser’s website lacks substantive content discussing valuation methodology, IRS requirements, or recent case law.
The appraiser claims to have had no IRS audits, a claim that cannot be verified because appraisers are typically not notified when their reports are audited or guarantees acceptance of their appraisals by the IRS.

Why This Diligence Matters

In Mann v. United States, the donor lost a deduction of $313,353. In Loube v. Commissioner, the donor lost the entire deduction on a Form 8283 ground that the donor’s CPA should have caught. In both cases, the donor presumably paid the appraiser, paid the deconstruction contractor, paid for tax preparation, and ultimately recovered nothing for the donation. The cost of one to two hours of additional review by the donor’s CPA, applied to the checklist above, is small relative to the loss that the courts have already memorialized.

The deduction is real. The methodology to support it is well established. The diligence to confirm that the appraisal in hand meets the standard is the donor’s protection. We encourage every donor, and every CPA or tax attorney advising a donor, to apply this checklist as a matter of standard practice.