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June 2017 | Issue 86 Background Constellis Group,  Inc. is a private security firm.  In December 2013, the Company formed an Employee Stock Ownership Plan (“ESOP”), which purchased 100% of Constellis’s voting stock.  Wilmington Trust NA was named Trustee of the ESOP.  Less than a year after the ESOP was created, the ESOP sold all […] More...


March 2017 | Issue 85 Introduction Richard and Steven Parker are brothers who ran a flower business in Scotch Plains, New Jersey.  Richard is the President of Parker Interior Plantscapes (“PIP”), which installs and services plants and flowers in commercial settings.  Steven is the President of Parker Wholesale Florists (“PWF”), which is a garden center.  […] More...

Dell Appraisal Spawns a Multitude of Valuation Approaches

February 2017 | Issue 84 Introduction A Delaware Chancery appraisal case involving computer company Dell Inc. gave rise to a multitude of valuation measurements.  It is instructive to see how the court sorted through them in coming up with its final appraisal conclusion.  The case is In re Appraisal of Dell Inc., 2016 Del. Ch. LEXIS […] More...

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Incomplete Appraisal Report Dooms Charitable Deduction

February 2013 | Issue 63

Harvey Evenchik made a donation of stock in a real estate holding company to a non-profit housing charity. On his tax return he took a charitable gift deduction of $1 million. The IRS disallowed the deduction, claiming that the appraisals that accompanied the tax return were inadequate.  To the IRS they were not “qualified appraisals.”  The matter ended up in Tax Court, and the court upheld the IRS. Evanchik v. Commissioner, T. C. Memo. 2013-34 (February 4, 2013).  A brief review of the high points of this case might help others avoid the same fate.


The Evenchiks donated a 72% share interest in Chateau Apartments, Inc. to FHR, a non-profit housing corporation.  Chateau’s only assets were two apartment buildings in Tucson, AZ.  They attached two appraisals to their return, one for each building.  They did not attach an appraisal of the holding company shares.  The real estate appraisal values totaled $1,445,000. The donated 72% interest in Chateau was valued at $1,045,000.

Where the Return Came Up Short

The sole question considered by the court was whether the Evenchiks submitted a “qualified appraisal” for the charitable deduction.  Here were the shortcomings of the Evenchiks’ appraisals, in the eyes of the court.

  • Neither of the appraisals appraised the correct asset.  The asset donated was the stock in the holding company.  The appraisals valued the underlying real estate.
  • The appraisals failed to state the date or expected date of the contribution.
  • The appraisals failed to provide a statement that the appraisal was prepared for income tax purposes.
  • The appraisals failed to give the appraised fair market value on the date (or expected date) of contribution.

On the issue of the wrong asset being appraised, the court had this to say:

“An appraisal of the incorrect asset prevents the Commissioner from properly understanding and monitoring the claimed contribution.”

The Court’s Conclusion

The court concluded that as a result of these shortcomings, the Evenchiks had not submitted a qualified appraisal.  In its words:

“The appraisals had gaping holes of required information… The Evenchiks are not… entitled to the deduction they seek.”

The Takeaway

If you’re donating a cow, don’t attach an appraisal of a horse.

IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction(s) or tax-related matter(s) addressed herein.