That’s the only way I can explain why this story didn’t come out during the GOP primary.
Republican US Senate nominee Gabriel E. Gomez claimed a $281,500 income tax deduction in 2005 for pledging not to make any visible changes to the facade of his 112-year-old Cohasset home, a concession so valuable that it is classified as a charitable contribution under a federal law designed to protect historic homes.
But Gomez and his wife, Sarah, were already barred from making any changes to the exterior of their home under the bylaws of the local Historical Commission, raising the question as to whether their donation — the price of which is based on the loss of value in their real estate — had any monetary worth.
The Gomezes, whose 59 Highland Ave. home is located within the Cohasset Common Historic District, gave the historical easement to the National Architectural Trust, a Washington-based organization whose marketing of tax-deductible easements to homeowners has been targeted by the US Department of Justice.
Five weeks after the Gomezes claimed the deduction, the Internal Revenue Service listed programs such as this — that involve the “contribution of a historic facade easement to a tax-exempt conservation organization” — as one of its “Dirty Dozen tax scams.”
…
One specialist in conservation easement law, Scott Knott, a tax partner in The Ferraro Law Firm in Washington, D.C., said that if easements mandated by local laws are already in place, homeowners have nothing to claim as a tax deduction.
“The key is the valuation of the easement and if there is already a restriction on the property, the value is not diminished by the easement,” said Knott. “The value of any easement that has the same restriction already in place is zero.”
…
Dean Zerbe, former senior counsel for the Senate Finance Committee, who investigated abusive tax breaks, asserts the deduction for facade easements is “unconscionable” because it is almost exclusively for the “one percent…. It is wealthy people playing fast and loose.”
…
A Senate Finance Committee inquiry, which led to some reforms in 2006 in the program and tightened up procedures, prompted criticism on Capitol Hill of the nonprofit historic preservation firms that were marketing the tax deduction.
“It is very discouraging to find yet another example of snake oil salesmen misusing tax-exempt status and abusing the tax laws intended to encourage charitable giving, all for the purpose of making a fast buck,” [Republican Senator Charles] Grassley, then chairman of the Committee on Finance, said in a December 2004 press release.
Of course, the notion that someone should receive a tax deduction of nearly $300,000 for promising not to do what they can’t do anyway is absurd on its face, and that’s why the IRS targeted this particular tax scam as one of its “dirty dozen.” And the fact that Republicans like Chuck Grassley hate this particular deduction is further evidence of how sleazy it is.
Mike Sullivan and Dan Winslow must be kicking themselves over this.
Do you really think this would matter to Republican primary voters?
If anything, Gomez scores points for entrepreneurial scamming. What a clever guy, stickin’ it to the taxman!
That’s why Chuck Grassley, as staunch a Republican as any, hated this tax break.
Assuming the deduction is proper (not claiming it is,) then implying that Gomez is a cheater is out of bounds.
I know progressives follow a different set of tax regs, but most people use the ones published by the IRS.
The article says
1) They claimed this deduction.
2) The value of the deduction is premised on the loss of property value.
3) They were already required to not modify the façade.
4) Therefore they would not actually lose any property value by making the promise.
5) Therefore the deduction is improper.
Now, I suppose you could debate whether the facts laid out here are true or not. But, as stated in the article, this deduction is highly improper and Gomez is a cheater.
Yeah, that’s a pretty big assumption, for the reasons dcsohl and others have given. You can’t assume you’re right, and then complain that others disagree with you.
And I’m not disagreeing with anyone.
But the final authority for whether the deduction is proper is not the Globe, nor even Gomez’s tax counsel. It’s the IRS. It’s likely they would have flagged a single $281,500 tax deduction for review.
Let’s see what the IRS has to say about this before you label Gomez a cheater.
This is an election. We don’t have time to wait for what the IRS has to say, especially since Republicans would instantly accuse Obama for abusing his authority if the IRS actually said anything about this case before the election.
The issue is now public. It is entirely up to Gomez to explain it to satisfaction of the voters. In the meantime, we can feel entirely free to speculate. That’s politics.
If Gomez’s deduction was vetted by his accountant and allowed by the IRS, why would it be a topic for discussion let alone a scandal? If tax laws allows this, what’s the big deal? That he took advantage of a convoluted law which has persisted through Congresses and presidents both D and R? Welcome to the Bizarro World of Tax Preferences. But blame Washington, not Gomez.
If Gomez’s accountant/tax attorney has made an error in claiming this deduction, then Gomez owes back taxes, interest, and penalties (often stiff.) Of course, the Globe doesn’t ask Gomez or his tax guys about it, that I can see from David’s excerpt.
IS this illegal? Or does the Globe just think it SHOULD be illegal?
I live in a historic district – the Old King’s Highway. It’s (I think) the only multi-town historic district in the nation, it applies only to facades and cosmetics, and it is comprised of ALL THE LAND NORTH OF RT. 6 from Sandwich to Orleans. Think for a moment if all that area looks like Colonial Willamsburg.
And there has been a LOT of variance on legal enforcement – both how it’s enforced and the ability of the OKH to do such enforcement. Merely being in the Cohasset district is no guarantee of that ‘law being in place’.
This is sleazy conduct akin to Romney’s 47% of America are moochers philosophy. It doesn’t speak well to the character of an aspiring leader. But that is precisely what appeals to much of the Republican base in Massachusetts: a deeply disaffected group. The view of much of this constituency, and perhaps of Gomez as well, is that people have only the minimum legally required obligation to each other, and the devil take the hindmost. By that standard, Gomez has done nothing wrong and even arguably something right.
This is politics. Any politician taking advantage of a real or imagined loophole for huge personal gain is automatically a topic of interest regardless of whether it is legal or not, and especially in this case where the deduction is highly suspect.
Don’t forget that accounts/tax attorneys all too frequently have given the ok to questionable deductions and it often takes several years for the IRS to catch up. The fact that the IRS did not immediately reject his tax filings does not in any way imply that the IRS reviewed and approved anyone’s deductions.
Any way, there is absolutely no way that Gomez is going to be able to portray himself as a regular guy after this.
Try to distinguish between tax avoidance and tax evasion, although I understand how progressives do not want to acknowledge the difference.
Has Gomez incorrectly taken the historic tax credit or not? I’ll be angry at him if he maliciously and wrongly claimed a deduction, but I won’t care at all if it is kosher. I hope this is the position progressives would take if it were Markey and not Gomez in the news.
I hold both to the same standard.
This is Exhibit A why we must cap deductions for everyone at $20,000. This will hit the super rich. No more of this “charitable deductions” to non-profits, who don’t pay the tax in the money or gifts they receive. Gomez sent this gift to a non-profit conservation organization (so the article says).
The only way to end the scam of the rich not paying what is expected, is to cap the deductions, period. Otherwise, this behavior is encouraged and the system will continue to be rigged against the little guy.
Can I write in Scott Brown?
He hurt the little guy with his votes and the philosophy he advanced. That is why he is working for Fox now: the best friend of large corporations.
MARKEY is the one who voted to reauthorize this deduction!!!
And I’m not sure if he didn’t help create it when Scott was in grade school!
This is the entire Republican campaign. “Screw everything over 50”. Old people vote, gosh darn it.
,
I have been involved with organizations who have worked to get people to donate development easements so that land would be kept as open space. This has prevented large properties from being subdivided. They were able to do so because of laws that allowed tax deductions. The law, in and of itself, is not a bad law. These were organizations with goals of preserving land. Lets leave aside the appropriateness of organizations that purportedly exist simply to allow people to take tax write-offs. There is no disagreement that it is legal to make a contribution of an easement or restriction to a non-profit and then deduct the amount by which the donation reduced the value of the property. It appears that this DID NOT reduce the value of the home by the amount he deducted. That makes the deduction improper.
I don’t have a problem with a legal tax deduction that promotes historic preservation.
So let me get this straight.
1) If an elected official votes for a law that results in a “questionable” act, then that elected official’s hand are dirty as well as if he was an accomplice,
then (2) every stinking Republican “mindless slave” to the NRA is guilty of Murder in Connecticut and Colorado and Boston and everywhere else where a military assault weapon is used to mass murder people/children.
Damn the Stinking Republicans!
Markey, presumably, voted for the federal tax that allows deductions on charitable donations. Gomez used this, entirely legitimate, law in contravention of local ordinances to his profit.
Gomez, it appears, slid between the interstices of the federal law and the local ordinance: to wit the LOCAL ordinance prohibited changes to the facade on his house nullifying the value of an easement which he (Gomez) later valued, for federal tax purposes, at $281,000.
If Markey voted for an entirely legitimate law… and Cohasset enacted entirely legitimate ordinances… which Gomez treated like a loophole… why is Markey to blame, in any way shape or form???
letting people take the deduction when their home’s value didn’t go down one plugged nickel as a result of the easement donation? I don’t think so.
The real issue is not the deduction’s existence, it’s its abuse.
Who cares if Winslow&Sullivan’s oppo research sucks.
The lede is this:
Gabriel Gomez took a tax deduction larger than ninety-x percent of Massachusetts families annual income in exchange for *not* doing any work on the front of his house. And if that wasn’t enough, he isn’t legally allowed to change the front of his house anyway! The rich play by a different set of rules, and it isn’t fair. Ed Markey wants to fight for middle class folks like you who don’t get to pay almost $100,000 less in taxes in exchange for not doing a damn thing.
Is what Mr. Gomez did legal? It turns out that the answer is unclear — the Globe article mentioned the DOJ looking into this precise scheme. If it turns out to be a no-no, should Mr. Gomez be penalized [above and beyond back taxes plus interest]? Frankly, that’s not the point.
Bottom line: if not illegal, it is damn embarrassing, and it makes Gomez look [even more] like an out-of-touch special-set-of-rules banker, and that ain’t a popular group of folks amongst general election voters.
What was done here was to use a title to the post that I agree with you did a very poor job of summarizing what the post was about.
But, by definition, the “lede” is the first part of the story after the headline (or post title, in this case). Ignoring David’s quick first sentence (which essentially serves as a sub-headline in this particular post), the lede is therefore the cut and paste first sentence of the article. The same lede as the Globe article itself.
Your comment, stomv, caused me to look up the definition of a “lede” so I do appreciate that. But, semantically, shouldn’t your comment should be titled ‘Talk about an irrelevant, uninformative and unnecessarily confusing choice of a tile for this post!”
Your comment, stomv, caused me to look up the definition of a “lede” so I do appreciate that. But, semanticly, shouldn’t your comment should be titled ‘Talk about an irrelevant, uninformative and unecessarily confusing choice of a tile for this post!”
If all you’re interested in is what’s in the Globe, well, read the Globe. We try to do more than serve as an aggregator for stories published elsewhere; my take on this is that it’s odd that it’s only coming out now. YMMV.
Burying the lede is when the juicy, important part of the story — what should be the lede — is way down at the bottom of the article, often after the page turn.
The lede in the Globe article is that Gomez took a giant tax deduction, not that his GOP primary opponents had bad oppo research. In my view, the Globe was right to make the lede the lede. I think david buries the lede because the important part of the story — even for us political nerds at BMG — is that Gomez took the giant tax deduction. A side conversation or later post about Sullivan and Winslow is perfectly fine and encouraged of course.
david buried the lede. I wrote about what the *story* is about, not about what david’s post is about. Good grief.
Ed Markey is in the record being against limiting the charitable deductions. Thus, the rich will continue their tax avoidance scams with “charitable deductions”, the difference in loss tax revenue made up by the middle class. So do us all a favor and not parley the notion Ed Markey will fight for middle class folks. Let me know if he changes his mind on the subject
How can this deduction be legal, Gomez purchased a home that was already considered “historical”, so he was limited with what he could already do with the home.
The two aren’t at odds. There are plenty of “charitable” contributions which the IRS considers charitable at 100% deduction, plenty of which the IRS considers charitable at 80% deduction, and plenty of which the IRS considers charitable at 0% deduction.
The donation of 280,000 dollars to avoid paying $100,000 to the IRS isn’t a tax avoidance scam — and very often those two hundred and eighty thousand dollars benefit society at large: donations to medical facilities, research, universities, social services, to name a few. The donation of an easement which you claim is worth $280,000 but sure seems to be worth $000,000 sure looks like a tax avoidance scam.
Don’t confuse taking a tax benefit for a genuine charitable contribution which benefits society at large with a tax scam. They ain’t the same thing, not by a long shot.
When Bill Gates gives $1 million to XYZ non-profit, that is income ($300K) less to the Federal Treasury. The $1 million XYZ received is not taxable either. So who makes up the difference? Who gets the bill? Perhaps we wouldn’t need an Internet tax if we stopped these charitable deductions.
If you believe in a charity or cause or want to give Harvard Univ. a big wet kiss, go ahead, but do this without screwing the Federal Treasury. Donate from the heart, surely this rich folks can afford to. Once we pay off the $17 Trillion, we can revisit the issue.
on capping otherwise appropriate charitable deductions, but that’s really not the issue with Mr. Gomez’s deduction. The issue is both (a) is it legal at all, and (b) even if legal, does it allow Markey and friends to portray Mr. Gomez in a very unfavorable light.
I think that people need to stop treating all tax deductions as bad things. If the deductions shake money out of the wealthy and toward the non-wealthy, that may be a reasonable exchange for the lack of taxes because there is a boost to the economy caused by shaking the money out of stocks/banks and onto Main Street.
What is better for the economy: Bill Gates keeping $700k in his bank and giving $300k to the government, or Bill Gates putting $1m into play in the economy and the government gets $0? The $1m will be taxed as it is paid to the employees of the non-profit. The $700k would not be taxed if it was tied up in a stock somewhere.
I tend to think that liberals made a deal with the devil when they agreed to lower the tax rate in exchange for “closing loopholes”, specifically deductions. Sure, it may seem unfair that some CEO is spending money to avoid paying taxes, but it is better for him to spend money on some tangible perks than it is for him to “invest” the money somewhere – because the investment is pumping the Wall Street economy disproportionately.
This appears to be a very simple case: Gomez took a false deduction because he valued his “donation” for far more than it was worth. His donation of a restriction was worth precisely $0 because a restriction was already in place. This is a perfect example of how he thinks that he should be above the rules of the common person.
I would like to know how Gomez made all his money to begin with. I’d like to see the dots connected from “Navy Seal” to “Principal at Advent International”, a job which apparently earned him millions per year. He was awarded his MBA in 1996. He worked for Advent International for just nine years. He earned $8.5 million in the five years from 2007 to 2011. Keep in mind that the recession hit in 2008 – so how does someone earn so much so quickly? Does he have extraordinary skills? Did his education give him the ability to do that job – if so, why aren’t more people pursuing this path? Did his Harvard MBA give him entry into an exclusive club? Is that just what the typical “investment banker” is paid – and if so, why so much? Or am I missing something?
According to the research I’ve done, Gomez’ role was “organizing and managing deal sourcing”. Gomez “was managing an associate sourcing program like he managed at Summit, later as the firm grew his role expanded to being the principal point of contact for all investment banks and Advent, both in the U.S. and globally. In this role he was involved in sourcing a number of deals, but wouldn’t have been the official lead”
What does that even mean? What did he do on a day-to-day basis? What skills did he have that were worth millions of dollars per year? According to a generic article I read, sourcing means “finding the perfect match between a PE firm and a company or entrepreneur”. Again, what does that even mean? How is that worth millions per year?
What kinds of deals was he expert in sourcing?
Why is it all or nothing. So if Bill Gates was willing to donate $1 Million, but now allow a sudden. Since he can’t save himself $300K in federal taxes, charities get zilch? Why would you draw such a conclusion?
FYI, with $17 trillion debt, I prefer the money goes to taxes first.
that an over-all cap on charitable donations make sense. I could get behind that, especially seeing how so many charitable organizations (coughgatesfoundationcough) can actually work against progress.
However, your point is moot: Gabriel Gomez not only doesn’t support your position either, but benefits tremendously from the status quo.
There is more than one way to get things done. A cap would make some sense, but so would cracking down on obviously abusive write-offs, tax avoidance schemes and “charitable contributions” that aren’t really going toward charity.
You can only deduct up to 50% of your AGI. We can debate if the cap should be different, but there is a cap.
I will say that, if deductions are capped at a low level, the wealthy will have far less incentive to donate. Without a corresponding increase in the tax rate applied to high incomes, that money will sit in their bank accounts or, more accurately, be invested to create phony profits for Wall Street magicians and plenty of jobs in Asia.
For that reason I would not support a cap like Dan’s absurd $20,000 proposal, which would screw people like my aunt and uncle who deduct far more that that for state, local and property taxes alone in NY, plus mortgage interest and charitable gifts, and are barely making it with three kids in high school.
I would support rigorous enforcement of these “conservation easements” to make sure the deduction corresponds to an actual decrease in home value. Conserving old homes is a laudable goal, but this kind of double-dipping is just wrong.
Cant be underwriting the huge deductions by those, who choose to live in high taxed areas of NY/NJ like your aunt/uncle, or our friends in Newton, with their million dollar mortgage interest deductions and absurd property taxes, because they can’t build a high school on time and on budget.
Many of these charities are a business, such as the various religions. another one is higher education. IMO, if one only donates b/c of the deduction on your taxes, then you really don’t believe in the mission of the charity. I donate to one charity, an animal shelter, b/c I believe in their cause, regardless of any tax benefit.
with you that people should donate to charities they believe in, whether they get a deduction or not, and I’m sure many people do.
My aunt and uncle did not exactly choose to be in New York. They were born and raised there, moved away, couldn’t find work. They returned and spent many years trying to find someplace else to move, finally deciding to stay until the kids finish school so as not to upend their lives. My uncle works at JFK Airport and there’s noplace with decent schools within 90 minutes of that without high property taxes. They bought the smallest house in their town and it was still $350K with some awful thing like $15K in property taxes.
As for Newton, Boston Business Journal reports that the property tax rate is 279th of 351 towns in the Commonwealth. One of the 278 towns with a higher rate is Waltham. Newton taxes, in some cases, might be higher because assessed value is higher, but that doesn’t bother me so much. And, being a neighbor, you know Newton’s not all high end. There are much more modest neighborhoods too.
As for who bears the burden, I happen to agree with you that people in Fall River should not be underwriting large tax deductions for people making bundles of money. That’s why I would support raising the rate on adjusted gross income over $250K to 40 percent, and on adjusted gross income over $500K to 50 percent, and treating dividend income (and perhaps capital gains) as ordinary income.
While tax assessments are a gauge, don’t forget residential exemptions too. In Waltham, we get like $80,000 off the tax assessment, likely the highest in the state.
I won’t convince you we must curb the charitable deductions, your idea still keeps alive the convoluted tax code, and the gimmicks will continue.
You may agree with me, that Buff’s Pub makes the best wings.
not by a long shot.
[out of memory, so please correct]
* Boston ~$120k
* Brookline ~160k
* Cambridge ~$200k
* Newton $0
* Quincy $0
* Somerville ~$140k
By the way, thanks for the info.
Should someone in Belmont Hill, who pays $20K in property taxes, be allowed to deduct all of it, while a stiff in Waltham who pays $2K, or a renter on Chelsea, gets very little or no detection? You think that is okay?
Don’t mean to be “slightly” off topic, has to do with capping deductions, etc
I’m not entirely sure what you are asking. Are you asking about Federal deductions? I don’t recall — are those fed deductions on Schedule A or on the 1040 itself or elsewhere?
Keep in mind that the Belmont Hill resident is paying $20k in local taxes *less* about $5k in federal taxes (25% marginal rate might be low, but might be OK)
The Waltham resident is paying $2k in local taxes *less* about $500 in federal taxes.
At the end of the day, the Belmont Hill resident has paid about $15,000 more because of his property tax, and the Waltham stiff has paid about $1,500. Furthermore, don’t forget that the residential exemption is a flat dollar amount, so as a percentage of home value, the Waltham stiff is paying a far lower property tax rate than the Belmont Hill resident, assuming that the tax rate is comparable.
I won’t argue that the tax code in this area is optimal. For example, I find it strange that if a town covers the cost of trash removal in their base services, than the taxes people pay to fund it are tax deductible. But, if a town charges a fee for the service, that isn’t deductible.
much higher taxes for the very wealthiest.
Moreover, I was less making an argument for a reduction in the cap, than I was making an argument that such a reduction isn’t politically feasible at the moment and that blaming one guy for it makes no sense when the other guy not only supports the status quo, but also benefits tremendously for it.
I was pointing out a flaw in his argument — that even if what he said made sense at some level, it was a) moot and b) applied unfairly.
about $50,000 more than my house!
Right or wrong, this is the kind of stuff that’s going to kill his candidacy. Markey has problems with his optics–like his house in Washington–but his ideology is pretty well-established in his record. We have a pretty good idea that he’ll vote the way we want. But Gomez has no record. His ideology is at best a blur. He’s running purely on optics, and this tax break looks bad. His rejection of the People’s Pledge looks bad. More Romneyesque stuff will come out. After 30 years, Markey has been pretty well vetted. Legal or not, this is a bad omen for Gomez.
This is not 2010. It’s not a mid-term. Gomez isn’t Scott Brown. To win, he needs to excite unenrolled voters at a time when most people are thinking about the Cape, not special elections. Gomez has got a tough road ahead of him.
[image of mime crying]
Stomv, with all due respect, it’s ALL THE SAME RULES. I’m looking at an older, printed edition of the IRS Code, around 900 pages, and as far as I can tell it applies to you, me, Gomez, and Warren Buffet. Same for everyone, not different.
Maybe it’s not fair, per your definition of fair, but that’s the IRS Code, that’s the law. The Code is the predominately a political document, and the historic tax credit pre-dates Gomez’s birth.
Incidentally, the ITC for Historic Preservation is a Democratic invention, and may even pre-date Markey’s election to Congress. It has a specific purpose which Congress supported and continues to support over its 40 year existence.
That Gomez takes avails himself of the deduction is somehow wrong, immoral, or even embarrassing? Come. On.
and perhaps wrong and immoral. If Gomez really can’t change the exterior anyway, than there’s no way that agreeing to not do what he can’t do anyway is worth three thousand, no less three hundred thousand. That’s the offensive part of the issue, not that the tax deduction exists in the first place.
The story as it’s been presented doesn’t pass the smell test. Maybe there is more information which justifies the deduction, but it hasn’t been forthcoming.
But keep holding on to this idea that it must be legal and moral and fair, and keep exclaiming it. Every time you do, regular folks think to themselves that it is a weaselly thing to do.
This isn’t a court of law or a court of ethics. Gomez is a candidate, and we’re in the court of public opinion. In this court, what matters is how it looks and sounds to voters, regardless of the details of the tax code.
When government agencies are deprived of funds enforcement gets cut, allowing people and businesses to bend the rules beyond all reason because there is so little chance of being called to account.
To cite but one example: the fertilizer plant in West, Texas that blew up last month did not have an on-site inspection by either EPA or TCEQ between 2006 & 2013 despite a record of violations. OSHA – the agency charged with ensuring worker safety – hadn’t been there since 1985.
So is it any surprise that Gomez took advantage of this very questionable deduction? Had the IRS even tried denying it he had the means to tie them up in court, making pursuing it prohibitively costly. So while technically this specific deduction may not be illegal until it’s ruled so, let’s keep it real: if not the letter of the law, it violates the spirit of it. This episode shows how the Republican crusade against government is for the most part helping rich people like Gomez far more than those very voters the he is trying to woo.
And that speaks to the hypocrisy that makes a big difference between when most Republicans vs most Democrats take advantage of such things: the Democrats tend to be advocating for fixing the problem while the Republicans sell it like a get rich quick scheme to the very people it’s hurting.
Gomez took this deduction in 2005. Not only did the Bush budgets systematically underfund IRS enforcement, the Bush administration targeted the poor for enforcement rather than the wealthy during that era.
Uh, the link says the IRS Criminal Investigation division department was investigating bogus EDITC payments. Progressives call this “targeting the poor?” I call it enforcing the law.
The link says the IRS withheld refunds on the assumption of fraud… very little investigation, it seems, was done at all…
Then let’s enforce the law here.
And who says the deduction is “very questionable”? BMG? The Globe?
The deduction violates NEITHER the letter NOR THE SPIRIT. The intent of the federal historic preservation credit was to stimulate the preservation of historically important architecture.
But it’d be OK for Dems to take the deduction because, well, Dems “tend to be advocating for fixing the problem…” Oh wait, the historical ITC was and always was bipartisan! And Markey voted to extend it!
Double standard if I ever saw one.
I don’t think anyone would confuse him as being progressive.
The issue is that he took a financial value of offering to not do something that he’s not able to do anyway.
“The intent of the federal historic preservation credit was to stimulate the preservation of historically important architecture.”
True. It’s perfectly legitimate to take the tax deduction if you’ve created an easement which has value. But in Mr. Gomez’s case, that preservation was already on the books, which means that Mr. Gomez isn’t entitled to take credit for that preservation. The easement he created had no value because it was redundant.
This falls squarely in Mr. Gomez’s lap, and it’s going to keep burning him. We expect politicians to take credit on political matters for which they don’t deserve. We demand that politicians not take tax credit on matters for which they don’t deserve.
The issue is not the general question whether it’s a good idea to have a historic preservation tax credit – we can debate that another time, but it’s not that interesting. The question is whether Gomez should have gotten a $300K tax break for promising not to do something that he was already legally barred from doing. That, as Andy Hiller concisely explains in his very good report on Channel 7 (see my post from this morning), is what we’re talking about. When you say that Gomez’s “deduction violates NEITHER the letter NOR THE SPIRIT,” I think you are wrong. It certainly violates the spirit, and it may violate the letter.
BMG is a blog for liberal Democracts and Unenrolled moderates, like myself. I am afraid if you continue to be just pro-Rebublican, they do no wrong, then you will not be welcomed, as I am, to the BMG family.
… don’t you get??
From the IRS in 2005:
“Abuse of Charitable Organizations and Deductions. The IRS has observed an increase in the use of tax-exempt organizations to improperly shield income or assets from taxation. This can occur, for example, when a taxpayer moves assets or income to a tax-exempt supporting organization or donor-advised fund but maintains control over the assets or income, thereby obtaining a tax deduction without transferring a commensurate benefit to charity. A “contribution” of a historic facade easement to a tax-exempt conservation organization is another example. In many cases, local historic preservation laws already prohibit alteration of the home’s facade, making the contributed easement superfluous. Even if the facade could be altered, the deduction claimed for the easement contribution may far exceed the easement’s impact on the value of the property.”
It’s pretty darn clear cut. The only way it could be more clear cut is if they actually used Gabriel Gomez picture as a cautionary note.
If the intent of the law was “to stimulate the preservation of historically important architecture,” as you say (and I agree with you), then how does Gomez’s use of it fit within the spirit? The home in question was already preserved. What additional preservation was the government’s offering of a tax deduction buying for itself?
He’s only supposed to treat as a “contribution” to NAT, and therefore deduct from his AGI, a bona fide reduction in the market value of the home. So far there’s been no evidence such a reduction occurred. If it didn’t, but he claimed a $281K reduction on his taxes, that violates the letter of the law as petr’s source points out.
My question is this: Did he petition Cohasset to reduce his assessment for purposes of local property taxes on the basis of the easement? I’m guessing not. He would have been laughed out of the pretty little town hall three doors down from his “reduced in value” house.
how our visiting Republicans are now great defenders of due process and the rule of law, after their party spent the last decade plus shredding the Constitution of the United States (except for the Second Amendment, which they put on steroids by giving it a meaning it didn’t have for its first 217 years of existence).
Then I remembered Gomez is in the tax bracket where such due process rights kick in for the Republican mind, and it all made sense.
NY Times, Dec. 12, 2004:
The NPS has a brochure out that links the value of the easement – and thus the deduction – to the difference in the home’s market value before and after the easement.
If the easement places only restrictions already in place due to local law, the change in home value would be minimal (as in not $280K), although there’s some small possibility Cohasset would abolish its historic district rules and he’d still be bound by the easement.
Despite your previous over-the-top post of 1:27 PM. I believe you have hit the nail on the head here. Thanks for digging up the NYT quote and the National Park Service brochure. It exactly describes Gomez’s issue.
That said, let’s find out the details about Gomez’s federal historic preservation tax deduction. This includes the extent of Gomez’s easement (whole building? entire property? National Register?), the extent of Cohasset’s restrictions, relevant appraisal information, and IRS acceptance of the deduction.
Maybe Cohasset’s restrictions are far more narrow than what is allowable under the federal code in which case the $281,000 could very well be justifiable. If Cohasset’s restrictions and Gomez’s federal easement claims are equal, then maybe the deduction, in part or in whole, is not allowable.
This has been my point all along. The law is discernible, and applies equally to all.
The law, in its majesty, forbids the rich, as well as the poor, from donating restriction easements to tax exempt historical trusts… I’m sure the law also restricts the poor, as well as the rich, from making their own estimates of the value of that easement.
Darn. And I was just about to donate the easement on the apartment building, that I don’t own, for a cool 281,000… Drat! Missed it by that much.
There is no “federal easement.” The issue is whether the market value of the house went down as a result of the easement he granted to the nonprofit. If it did, he can claim that amount (and only that amount, determined as accurately as possible) as the “value” of his donation and deduct it. If it did not, he can’t claim anything.
It’s true that whether his house went down in value from the easement would depend on whether the easement is more restrictive than the Cohasset Common Historic District. All indications are that it is not. The CCHD is pretty strict. He couldn’t paint it anything but white, for example. They don’t grant many waivers.
If he’d provide some evidence, we’d know better. But I find it hard to believe that his house went down by anything close to 15% of its value as he claimed on his 2005 taxes. And if it did, why didn’t he petition Cohasset for a downward revision of his local assessment?
Gabriel Gomez – tax cheat! I posted it to DKos just now, giving David and BMG full credit – hopefully it will turn up in their state blog review this week as well!
but I’m reminded of the work of David Cay Johnston who has documented in detail how the tax system, with its deductions for things like airplane ownership, provides a lot of legal tilting toward the rich.
He interviewed Elizabeth Warren for that book – that’s how I became familiar with her before she rose to fame with the CPFB. That book should be required reading!
Did he ever own a dog? Dog carrier? Garden hose?
Many questions to be answered.