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DIY Appraisals Like DIY Surgery Can Be Bad for Your Health
Joseph Mohamed Sr. v. Commissioner of Internal Revenue
May 29, 2012
Having become a successful real estate investor and developer, Joseph Mohamed, Sr. and his
wife Shirley planned to use their wealth to assist certain charities after their death. They
established a charitable remainder unitrust (CRUT) to which they contributed five properties
worth millions of dollars. CRUTs allow the donors to retain the income benefits of their
contributionsandenablestaxpayerstoobtainacurrentdeductionforpropertycontributedtoit.
In2003JosephcontributedcertainpropertiestothetrustandcompletedForm8283Noncash
CharitableContributionstobefiledwithhisForm1040forthatyear.CodeSection170andthe
related Regulations govern the deductibility and reporting requirements for charitable
deductions.
No deduction under Section 170 shall be allowed with respect to a charitable
contributionunlessthesubstantiationrequirementsdescribedintheregulationsarefollowed.
The Regulations are fairly clear about the documentation required, notwithstanding some
ambiguityontheForm8283in2003(whichtheCommissionercorrectedinsubsequentyears):
(A)Obtainaqualifiedappraisal(emphasisadded)forsuchpropertycontributed
(B)Attachafullycompletedappraisalsummarytothetaxreturnonwhichthedeductionfor
thecontributionisfirstclaimed(orreported)bythedonor.
Aqualifiedappraisalisdescribedasfollows:

Itmustbeperformednomorethan60daysbeforethegiftandnolaterthantheduedate
ofthereturn.(Mohamedinanattempttocomplyhasaqualifiedappraisalcompletedafter
theduedateofthereturn).
Itmustbesignedbyaqualifiedappraiser(emphasisadded).
18NorthMainStreet WestHartford,CT06107
860.519.5648 Fax860.519.1982
Valuations@BrentmoreAdvisors.com

Itmustnotinvolveaprohibitedfee.

Itisimportanttonoteherethatthequalifiedappraisercannotbethedonororthetaxpayer
claimingthededuction.
Again, Mohamed completed Form 8283 for 2003 and provided values for the properties
contributedtotheCRUTanddidnotsign,asrequired,theDeclarationofAppraisersectionof
theform.Hedidhoweverincludetwodocumentswiththeform:
AStatementofExplanationprovidingadescriptionofthepropertiesandthevalueforeach,
and,
AsecondonetitledAppraisedMarketValues,whichprovidedinformationontheproperties
anditemizedsomeoftheexpensesrelatingtoimprovements.
Mr. Mohamed signed the second document and indicated his title was Real Estate
Broker/Appraiser.
The Court in ruling for the Service disallowing the charitable deduction found that while
Mohamedmayhavebeenaqualifiedappraiser,hewasprecludedfromprovidinganappraisal
oropinionofvalueashewasthedonorandtaxpayerclaimingthedeductions.
TheCourtalsonotedthatthebasicthresholdrequirementsforanappraisalsummarywerenot
met.Infact,theCourtfound,thattheattachmentsdonotindicatetheyareappraisalsatalland
didnotmeetthequalifiedappraisalrequirements.
As indicated earlier, Mohamed presented independent appraisals afterthe period indicated in
the regulations and the Court found them to be untimely. He also argued that he was in
substantialcompliancewhichwasalsorejectedbytheCourt.Interestingly,theMohameds,as
theCourtdescribes,makesonelastditchefforttosavetheirdeductionstheynotethatthe
Form8283in2003and2004(yearsinwhichpropertywasdonatedtotheirtrust),thattheform
didnotindicatethatanindependentappraisalforcontributionsinexcessof$5,000wasrequired
and that conflicting messages were apparent regarding sections to be completed and what
requiredanappraiserssignature.
The Court appears to dismiss these arguments and notes that the Commissioner has since
changedhisformtoreduceconfusion.Whetherthisargumentwillbebroughtuponappealis
unknown.Itisclearthatnotreadingtheinstructionsmayhavedealtthetaxpayeralethalblow
not only from the standpoint of completing the form correctly but in obtaining a qualified
appraisal.
DespiterulingagainstMohamed,theCourtexpressedameasureofsympathynoting:

Werecognizethatthisresultisharshacompletedenialofcharitabledeductionstoacouple
thatdidnotovervalue,andmayhaveundervalued,theircontributionsallreportedonforms
that even to the Courts eyes seemed likely to mislead someone who didnt read the
instructions. But the problems of misvalued property are so great that Congress was quite
specificaboutwhatthecharitableincludehavetodotodefendtheirdeductions,andwecannot
inasinglesympatheticcaseunderminethoserules.