Scenario:

Your client, Phil, is a serious collector car enthusiast. He owns more than 20 collector cars worth more than $25,000,000. He also likes to buy cars, hold them and sell them when they appreciate in value. At a recent auction, Phil purchased a NASCAR race car which had been driven by the 1998 NASCAR champion.

Prior to the auction, the car was value at $110,000. When the bidding began, the cars owner announced that all of the proceeds from the sale would be donated to a New Mexico animal shelter which is an IRS approved charitable organization. Phil is also a philanthropist and animal lover. Because the proceeds would benefit the animal shelter, Phil bid $253,000, $143,000 more than the cars value.

Phil is now asking for your advice on whether he can claim a charitable contribution deduction and, if so, how much. Phil's estimated AGI for this year is $840,000.

He is also concerned that he retain an appropriate basis in the car for resale gains purposes.

Assignment:

Using Nexis Uni (See Video Using Nexis Uni Short Video in Content>Student Resources) and other online tax resources (e.g., www.irs.gov) and research the applicable law and then submit a brief memorandum addressed to Phil, in which you report the law and provide advice and a conclusion for Phil.

Identify the relevant statutory, regulatory, and other judicial authorities as discussed in those resources and discuss how these authorities affect your conclusion.