Professor Sarah Waldeck Quoted in The Detroit Free Press


 

 

On his way to becoming the University of Michigan's largest donor, Stephen M. Ross and a group of business partners donated a collective gift to his alma mater.

In return, the partnership claimed a giant charitable tax deduction: $33 million.

The Internal Revenue Service didn't buy it.

IRS lawyers flagged Ross and his partners as engaging in a "tax avoidance scheme lacking in economic substance … to the benefit of Mr. Ross and his associates at Related Companies.”

It would take nearly a decade of legal wrangling before U.S. Tax Judge James S. Halpern sided with the IRS last month and disallowed the entire $33-million write-off that the judge valued at a more paltry $3.4 million. The judge also imposed maximum civil penalties for a "gross valuation misstatement" that could now cost Ross and his partners millions more.

Seton Hall University’s Sarah Waldeck, a law school professor who specializes in charitable giving, sees the university's role as thoughtful despite unusual circumstances.

“In my experience, nonprofits work really hard to stay away from the question of what donors are actually claiming on their taxes," Waldeck said. "I think that the decision not to become tangled up in or involved in what donors’ tax returns looks like a legitimate, practical move by a nonprofit.”

Read the rest How Stephen M. Ross' gift to the University of Michigan ended up in tax court