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17 October 2017

A Tricky Tax Ruling for Trophy Hunters

A Tricky Tax Ruling for Trophy Hunters

A recent tax ruling affects the value of hunting specimens that are donated to charity. The issue comes down to whether the specimens can be valued at comparable sales cost or replacement cost. For one recent case, it’s a difference of more than $400,000 that is now owed in back taxes.

The Tax Court ruling states that, in 2006, an avid trophy hunter downsized his trophy collection by donating a portion of his hunting specimens to an ecological foundation based in Dallas. This was a large collection: He had hunted big game in Africa, Asia, Europe (including Russia), South America, and throughout the United States during hundreds of safaris and hunting trips over the years. In all, the hunter selected 177 items from his collection for donation to the nonprofit, claiming a charitable contribution deduction of $1,425,900 and even carrying the deduction over a three-year period because of its large amount. 

Only, years later, the IRS determined that the value of the hunting specimens he had contributed was at most $163,045 and asked for more than $400,000 in unpaid taxes in return. What went wrong?

  1. The quality of the specimens was questioned. Several expert witnesses supported that the donated pieces were not the excellent museum quality at which they were appraised. In fact, one witness referred to them as “remnants and scraps” and not worth nearly as much as the hunter claimed, which means they should have been valued as “commodities” and not “collectibles.”
  2. Details of provenance were missing. To be museum quality, a specimen should include certain details of provenance: the precise location where the animal was hunted, the nature of its habitat, the method by which the animal was hunted, and the health of the animal at the time. These specimens only included the state or foreign country in which the animal was killed.

Donating hunting trophies can be a great way to earn extra tax deductions, but be smart about it. What you donate, to whom and how it is valued can greatly affect how much you can deduct. Pulling the wool over the eyes of the IRS (pun intended) could be a losing battle. Contact us for questions. 

Image Copyright: petervick167 / 123RF Stock Photo


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