Wednesday, September 30, 2009

Burning Down the House? IRS Nixes Tax Deductions

According to this new Associated Press article, the IRS is trying to prevent homeowners from claiming a charitable contribution deduction for donating their home to local fire departments. Over the past few decades, dozens of homes across the country have been burnt to the ground so firemen in training can gain real life experience. However, the IRS is seeking to put a stop to this trend by claiming that such houses were already slated for demolition and that donating them for fire training is not an act of charity.

The dispute adds a new element of controversy to the decades-old debate over whether the risks associated with "live burns" — more than a dozen firefighters have been killed in the past two decades — outweigh the training benefits.

Fire chiefs say live burns supply invaluable training for volunteer departments, which make up the bulk of the nation's firefighters. And some fear that the tax disputes will discourage donors from coming forward.

Nobody tracks the number of live burns each year, but fire officials say they are increasingly rare because of mounting safety and environmental restrictions and because fewer homes are up for demolition in this slumping economy.

"We need to keep our skills current. Those opportunities are going to become fewer and farther between," said Fire Chief Mitch Ross in Upper Arlington, the wealthy Columbus suburb where the Sherwin Road home owned by James Hendrix burned down in 2004.

Churches, corporations and cities with vacant properties also donate buildings for fire training. Sometimes it is a dilapidated old barn, other times a sprawling suburban house. It's impossible to know exactly how many people have tried to claim such deductions; the IRS would not comment.