Every day we hear that the supply chain for goods is currently jammed in a hopeless bottleneck. Raw materials cannot arrive to factories to be made into new products and, even when they can, shipping lanes are blocked due to labor shortages and lack of delivery infrastructure. Hence, a consequence of the Covid-19 economic recovery, without an end in sight. We are told to start our holiday shopping early if we hope to have gifts delivered by the big day.
By necessity, deconstruction typically costs more than demolition due to the additional time needed to carefully take apart a structure with the aim of preserving the salvaged elements—opposed to the break-and-dump processes of demolition. However, these costs can be offset through tax deductions.
Sometimes clients and nonprofits fall into a rut of using the same service providers for many years, without evaluating what is right for their clients. We would like to offer an alternative and highlight the superior appraisals produced from our companies.
The most effective way to protect yourself and ensure your appraisal is accurate, fully documented, and substantiates the value is to hire an educated and competent appraiser.
Chirelli v. Commissioner, T.C. Memo 2021027 March 3rd, 2021 is another tax court case in which a taxpayer lost their non-cash charitable contribution due to lack of substantial compliance by the appraiser in producing an IRS Qualified Appraisal. There are important takeaways from this case to help protect taxpayers from losing their deductions and the subsequent paying of fines and interest should their appraisals not meet IRS standards. The IRS is serious about ensuring appraisers comply with the Internal Revenue Code and adhere to the strict definition of both Qualified Appraiser and Qualified Appraisal.
The exciting work of deconstruction continues across the country with Pittsburg being the latest city to adopt a deconstruction ordinance:
Deconstruction is the process in which a building is taken apart, piece-by-piece, with the aim of salvaging and reusing as many materials as possible. The scope of a deconstruction project can be as small as a bathroom renovation or the dismantling of a larger residential or commercial structure.
Tax policy aligning with environmental initiatives is a wonderful and rare occurrence within the Internal Revenue Code. An individual may choose to deconstruct, or “un-build” a structure and donate the materials to charity, rather than demolishing the structure and sending materials to the landfill. When donated to a 501(c)3 charity or governmental entity, a tax deduction can be taken for the IRS defined Fair Market Value of the materials, fixtures, furnishings, appliances and other property incident to the deconstruction. These materials and property have solid value on the secondary retail “resale” market.
As a practicing CPA of 19 years, mid-February is when I question my career choices as days disappear in tax and appraisal work with very little sleep. My experiences preparing work for IRS review carries over to my appraisal practice in critical ways.
In the recent Mann v. United States case, the federal court of appeals set important precedent in determining how deconstructed and donated building materials, furnishings, and fixtures should be valued in line with IRS defined Fair Market Value. Along with proper and accurate valuation comes two equally important issues: what does and does not constitute an IRS defined Qualified Appraisal and Qualified Appraiser? We first provide an overview of deconstruction and its tax implications, and then address the impact of the Mann case.