Theodore R. Rolfs, et ux. v. Commissioner, 135 T.C. No. 24
This was originally published on PAOO on November 14th, 2010.
We few, we happy few, we band of brothers — joined in the serious business of keeping our food, shelter, clothing and loved ones from combining with oxygen.
As the writer of an award winning blog that has attracted possibly scores of readers, it is to be expected that I will know some celebrities. One of them is the noted science fiction author, John Sundman. What is really impressive about John is that even though he is as advanced in age as I am, he is still a volunteer firefighter. He has given me a great deal of encouragement, so coming on a case touching, however, lightly on firefighting I decided to acknowledge his support.
Theodore Rolfs purchased some lakefront property in 1996. For some time, he pondered exactly what he wanted to do with it. Then his mother-in-law suggested that he build a residence on it to her specifications and exchange it for her residence. He decided that was a good idea and began planning accordingly. There was, however, already a residence on the property. Originally built in 1900, the existing structure could not be made mother-in-law worthy. Mr. Rolfe determined that it would cost him about $10,000 to have it torn down. Then he came up with a better idea.
He wrote to Gary Wieczorek, who was chief of police and also of the volunteer fire department of the Village of Chenequa, where the house was located :
As we have discussed, I would like to donate our house located at 5192  Oakland Road in the Village of Chenequa to the Fire and Police departments of the Village for training and eventually demolition. This letter shall serve as an acknowledgment that it is my intention to donate the house for such purposes. The house is available immediately. If any further approvals are needed please contact me.
Chief Wieczorek had a clear understanding that his department was not the recipient of a new recreational facility. He understood that the house was to be used exclusively for training purposes and that Mr. Rolfs expected that it would be burned down sometime in the first half of 1998. Matters developed in accordance with Mr. Rolf's expectations :
Sometime shortly before February 18, 1998, the Chenequa Police Department used the lake house for a training exercise. On February 18, 1998, the VFD conducted an initial training exercise at the lake house. On February 21, 1998, 11 days after petitioner's letter donating the lake house, the VFD conducted a second training exercise and burned the structure to the ground.
The firefighter training exercises at the lake house allowed the VFD to satisfy monthly training requirements imposed under Wisconsin State law. Chief Wieczorek believed the firefighter training exercises conducted at the lake house were superior to the training exercises otherwise available to the VFD.
Mr. Rolf arranged for an appraisal of his property. The appraiser did a valuation of the property with and without the structure that after standing nearly century went out in a blaze of glory to the edification of the Chenequa Volunteer Fire Department. The appraiser determined that the value of Mr. Rolf's property had declined from $655,000 to $579,000. Accordingly he claimed a charitable contribution of $76,000.
The IRS denied the charitable contribution and asserted a 20% accuracy related penalty. Mr. Rolf filed a petition to Tax Court now claiming a deduction of $235,250, the appraiser's estimate of the reproduction cost of the house. The Service responded by switching to a 40% gross valuation penalty.
The IRS got testimony from a professional "house mover", who indicated that it would have cost on the order of $100,000 to relocate the structure. Given its relatively modest nature and the high cost of land in the vicinity there would not have been anyone willing to pay to relocate it. They also brought on someone from the State of Wisconsin responsible for knocking down houses to make roads who reiterated that this was not the type of house that could be moved somewhere else.
In the end the tax court ruled that Mr. Rolfs was not entitled to a deduction since he had received a "quid pro quo" in the form of the removal of the structure that could not be brought up to mother-in-law standards. Since he had diligently followed all reporting procedures and a similar deduction had been allowed in Scharf v. Commissioner no penalties were assessed.
All in all, the satisfaction of helping the fire department should have been enough for Mr. Rolfs, winning on the deduction would have been icing on the cake. Samuel Johnson said "Every man thinks meanly of himself for not having been a soldier, or not having been at sea." Firefighting had not developed as a profession in his time or I am sure the would have added it. So I will close with a second quotation this one from an office worker's tribute to firefighters :
And when we met them on the stairs
They said we were too slow.
"Get out! Get out!" they yelled at us -
"The whole thing's going to go"
They didn't have to tell us twice -
We'd seen the world on fire.
We kept on running down the stairs
While they kept climbing higher
The collection of unidentified quotations continues to expand. A hint on the leading one is the fictional character also had a great deal of admiration for infantrymen.