Monday, August 2, 2010

Kirk Herbstreit Fumbles His Writeoff

ESPN’s Emmy winning Kirk Herbstreit is one of college football’s top commentators.

He was equally good in 1992’s, quarterbacking the Ohio state Buckeyes to a 13-13 tied with Michigan. Since a tie was as good as a win for Ohio State during the John Cooper years, Kirk is a hero to Buckeye fans everywhere.

Unfortunately, he was also the most accurate among the commentators in predicting the performance of the Michigan Wolverines under Coach Rodriquez.

Leave it to a Buckeye.

He was so good at Ohio State, and loyal to the Buckeyes, that he resides in Upper Arlington, a suburb of Columbus. No Goodbye Columbus for Herbstreit.

But Goodbye to a large tax deduction, for which penalties have attached.

Upper Arlington residents discovered an ingenious deduction that accomplished three goals: provide a public service, demolish an unwanted house, and claim a sizable deduction.

Forget remodeling; no DIY; just raze/torch the existing house and rebuild from scratch.

The solution: Donate the residence, but not the land, to the Upper Arlington Fire Department, which then torches the dwelling in a live fire exercise. The owners then have to clean up and remove the debris and ashes, but those costs are minimal compared to hiring a demolition company to destroy the house. If the Fire Department torches the property, it’s not arson.

This practice had been going on for about two decades in Upper Arlington. From 1988 to 2009 31 dwellings and 1 commercial structure were donated to the U.A.F.D., but only one since 2005. Residents in Minnesota and Wisconsin were adopting the tax stratagem. Too bad Birmingham, Bloomfield Hills, and Grosse Points, Michigan had not caught on.

The Herbstreits’ donated their Upper Arlington home to the fire department in 2004, claiming a charitable tax deduction of $330,000. They then spent over $1 million building the replacement home.

They mistimed the deduction, fumbling the return.

The IRS started questioning the practice in 2004, disallowed the Herbstreits’ deduction, and assessed a delinquency and penalties of $134,606. That burns. The United States District Court in Columbus affirmed the IRS’s ruling on July 21, 2010.

The court’s decision though was not based on the burning issue of the legality of such deductions, but rather on procedural penalties. The Herbstreits failed to provide both a “sufficiently qualified appraisal” and “a sufficient contemporaneous acknowledgment of the purported deduction.”

They, or their accountants or lawyers, failed to follow basic procedural requirements of the IRS Code. Admittedly, learning an Ohio State playbook as a quarterback is not the challenge of mastering the Internal Revenue Code of 1964.

As a football player at Woody Hayes U, Kirk should have realized it comes down to the fundamentals of blocking and tackling rather it be football or taxes.

Quarterbacks should never fumble the handoff or writeoff.

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