Contributions of Land to Governmental Bodies
| Publication year | 1973 |
| Pages | 17 |
| Citation | Vol. 2 No. 11 Pg. 17 |
1973, September, Pg. 17. Contributions of Land to Governmental Bodies
Recent developments have raised new questions around the subject of contributions of land to governmental bodies. The purpose of this article is to reconsider this subject(fn1) in the light of these recent changes, which seem to indicate the possibility that the Internal Revenue Service might not only deny the contribution deduction to a land developer when he contributes land to a municipality but in addition consider that taxable income is generated to the developer "donor." Additionally, numerous accounting questions have been raised in this area, such as whether the contribution of the property necessitates a change on the accounting statements.
Suppose a land developer is considering donating a certain piece of property to the county for use as a roadway. For the developer to take a contribution deduction under Section 170 of the Internal Revenue Code of 1954, as amended, certain basic elements are required: (1) a charitable contribution; (2) payment made within the taxable year; (3) verification of the gift according to the Regulations; and (4) use of the gift for "exclusive public purposes." However, even these elements are subject to interpretation; for example, it is a question of interpretation as to what constitutes a "charitable contribution." In Duberstein, Mose, 363 US 278 (1960), the United States Supreme Court defined a charitable contribution, emphasizing the use of the word "gift," as "detached and disinterested generosity"---but this guideline does nothing more than raise additional questions as to the interpretation of the guideline itself. It has been held that in detached and disinterested generosity there is no bargaining for and giving in exchange when making a gift. That is, there is no consideration, no quid pro quo, but rather there is one-sided giving with no reciprocal taking, or exchanging. It is this interpretation which leads to manifold problems for land developers. When a land developer "gives" property for use of roadways, parks, or developments, there is a question of whether his generosity is really detached and disinterested. If, in fact, there is some giving by the developer because of a requirement under statute or a giving of the property to obtain other benefits, such as rezoning, there has been a tendency to deny the charitable contribution because of failure to meet the Duberstein test.(fn2)
In addition to the question of interpretation of the term "gift," there is also the requirement that the gift be made within the taxable year. This requirement is not always easily met. Many times contributions of land are made to municipalities for roadways or other purposes, but the contribution is not "accepted" by the municipality until the given roadway or property in question meets specifications of the county. Therefore timing of the contribution is very important and should be carefully planned. This is not...
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