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Allen v. United States

ELR Citation: 6 ELR 20783
Nos. No. 74-2506, 541 F.2d 786/(9th Cir., 09/20/1976)

The court upholds the charitable deduction taken by land developers for a gift of 9.2 acres of redwoods to the city of Mill Valley, pursuant to a residential development plan, but remands the cause for a determination of the adjusted basis of the property. Taxpayers had bought, for investment purposes, 22 acres of land zoned for one-acre residential lots, but a local ordinance permitted half-acre lots if equivalent land were preserved as open space. The city adopted taxpayers' plan for half-acre lots on the condition that 9.2 acres of redwoods on the land be deeded to the city. Taxpayers complied, and on their 1967-1969 federal income tax returns they took a charitable deduction for the land transfer, which the Commissioner of Internal Revenue disallowed. The court below held for taxpayers by finding that they neither anticipated nor received any economic benefit in return for their gift of the property to the city. Even though the taxpayers received a quid pro quo, the trial court found that the taxpayers' "dominant purpose" was to preserve the redwoods, and the Ninth Circuit does not find that this fact determination is clearly erroneous.

The dissent, skeptical of the purely preservationist motive of the gift, argues that the taxpayers expected and received a clear economic benefit in assuring approval of the development plan and making the development more attractive to potential purchasers, and contends that the district court's finding was clearly erroneous.

Counsel for Appellees
Sandra J. Shapiro
Henry L. Glasser
Bancroft, Avery & McAlister
Tenth Floor, TWA Bldg.
240 Stockton St.
San Francisco CA 94108
(415) 982-7526

Counsel for Appellant
George G. Wolf
Jonathan S. Cohen
Department of Justice
Washington DC 20530
(202) 739-4343

Goodwin, J. joined by Wallace, J.; dissent by Williams,* J.