Whether your business is the law, or a business with accounting or asset protection needs, our business has been “Solving clients’ problems" since 1977.

Blog

12 September 2017

Miami Dolphins Owner Stephen Ross’ Disastrous 10-to-1 Charitable Deduction

Miami Dolphins Owner Stephen Ross’ Disastrous 10-to-1 Charitable Deduction

Stephen Ross, billionaire real estate developer and owner of the Miami Dolphins football team, is the University of Michigan’s largest donor. Unfortunately, he caught the attention of the IRS along the way and it didn’t end well for him. After a decade of legal proceedings, a tax court recently disallowed a $33-million charitable deduction Ross and a group of business partners took on a donation to U-M. Instead, the court valued the deduction at only $3.4 million.

So, how did this happen?

 This started with a unique asset—a Successor Member Interest (SMI) of an LLC that owned a 60-year old office building which housed a data center that was valued at nearly $3 million. U-M officials agreed to hold the asset for two years and then sell it, crediting any money made in this transaction as a gift from Ross.

The property was then purchased and sold again several times by other charities, increasing in value as it went, which is why (it’s assumed) Ross and his partners felt justified in claiming a tax deduction 10-times larger than the original value of the charitable contribution. In the end, the judge imposed maximum civil penalties for a "gross valuation misstatement" so that, now, Ross and his partners may owe millions more.

When questioned during court proceedings, Ross admitted that he himself found the disparity between the tax deduction and the original value of the asset suspect.

“When I gave the gift knowing that the deduction would be such, I asked, you know…how that was possible because I wanted to make sure that what I was doing was proper and legal,” Ross says. “And I was told by Mr. Levine who showed me that the regulations provided for this and had a table that set forth the valuation of remainder interest.”

Perhaps the lesson can be chalked up to the old “too good to be true” adage. Philanthropists need to learn another lesson as well. When determining the penalty, it appears the deduction will be entirely disallowed rather than reduced by $30 million because of a seemingly insignificant problem with the tax form.

IRS  Form 8283,  asks you when, how and the basis in acquired donated property. In this case, that part of the form was not properly completed.

Image Copyright: ugde / 123RF Stock Photo

Print

Please login or register to post comments.

Name:
Email:
Subject:
Message:
x

Expertise

When you hire Steven Bankler and his team of certified public accountants, you get seasoned, knowledgeable CPAs.

The IAPA International LogoRather than experienced bookkeepers, promising CPAs-in-training or studious interns in the process of completing their accounting degrees, you get professional CPAs. We Solve Problems. We provide creative solutions to our clients’ unique problems including tax and estate planning, forensic accounting, expert witness and litigation support.

Testimonials

Curriculum Vitae

Quoted Opinions

Newsletter Signup

First Name:
Last Name:
E-Mail: