Break sought in sale of land

Developer wants to claim `donation' to Md., saying $6.5 million sale was loss

December 15, 2006|By Rona Kobell | Rona Kobell,Sun reporter

A Pennsylvania developer who sold his 570-acre Worcester County farm to the state for $6.5 million - a price that critics said was far more than the land was worth - now says he took a loss on the sale and is seeking a tax break for his "donation" to Maryland.

Douglas J. Weidman has asked county officials to sign off on his federal 8283 tax form, which lists noncash charitable contributions and is often used for donated items such as cars or stocks. The county contributed to the purchase and is holding title to the land, which it intends to operate as an environmental center.

Weidman is claiming the transaction is a "bargain sale" because a new appraisal values the property at about $7 million, according to his representative, Tim Connelly. That means Weidman will claim about $500,000 as a donation.

Connelly declined to say how much the write-off would be worth to Weidman if the Internal Revenue Service approves the claim. But tax experts contacted by The Sun said that, depending on his income, such a donation could be worth $100,000 to $200,000.

Connelly said Weidman deserves the tax break, contending that he could have made far more money selling his property to a developer but instead "did a great thing" and sold it to be preserved as open space for the public.

"I can't believe the state of Maryland, let alone Worcester County, isn't going to throw him a party," Connelly said. "He had one of the most valuable properties, and instead of doing what everyone else does and develop it, he took a nasty, nasty deal from the state."

But many developers and county residents have said the state paid far too much for the property. About 70 percent of the property is wetlands that could not be developed under state law. And the rest of the property was largely undevelopable, officials have said, because it has no access to county water and sewer service.

Two appraisals, which were done last year at the height of the real estate boom, valued the property at $6.8 million and $6.6 million, even though it appears to have the capacity for only one septic system.

Connelly said the new appraisal is higher even with the recent dip in the market because a 335-acre tract near Weidman's farm recently sold for $8.1 million. That property, which was sold in an auction to benefit three local churches, can be developed into 11 lots for homes.

The state purchased the Weidman property as Gov. Robert L. Ehrlich Jr. was making land preservation a hallmark of his re-election campaign. The nonprofit Conservation Fund - where Connelly worked until about a year ago - brokered the deal and received a percentage of the sale price as payment. The transaction settled last month.

Weidman needed Worcester County to sign his 8283 form as the charitable organization accepting the donation. The county's attorney, Edward Hammond, said a county representative signed the form last week. Hammond pointed out that a clause at the bottom of the form says that signing it does not represent agreement with the claimed fair-market value.

"The state did the deal, not us," Hammond said. "We are acknowledging that we in fact received the property. If he attempts to value it higher than the consideration shown on the deed, then he'll have to justify it to the IRS."

John "Sonny" Bloxom, a Republican who was president of the county commissioners until his term ended last week, said he never would have authorized county officials to sign such a form. Weidman didn't make any charitable donations to the county, Bloxom said, and should not claim a gain based on an appraisal done after the purchase was complete.

"We bought it," Bloxom said. "We paid our share. There was no agreement that I know of that the property had any different value than what we paid for it."

Commissioner Virgil Shockley, a Democrat, agreed.

"I'm not a judge, but I couldn't see this flying very far," he said.

IRS spokesman Anthony Burke declined to discuss whether Weidman's 8283 form would trigger an audit. "We score all returns that come in, and based on that score, we select some of them for audit," he said.

Tony King, a partner in the CPA firm King and King Associates, said he would expect Weidman's characterization of the sale as a donation to raise questions.

"He didn't donate it to anybody," said King, who does not know Weidman and did not see his return. "He sold it to someone. That's a big, big issue there. The fact that you sold it for less than fair-market value does not trigger a charitable contribution."

Russell Shay, director of public policy for the Land Trust Alliance, a Washington-based organization that represents local groups trying to buy land for conservation, said tax breaks such as the one Weidman is seeking are an important tool in persuading people to sell land to states and trusts, which usually cannot afford to pay nearly as much as developers.

Shay said millions of 8283 forms are filed each year, many of them for bargain sales. But the IRS is paying a lot more attention to them than it once did.

"Everyone recognizes that it's very difficult and involves a lot of work and professional expertise to determine value of property," Shay said. "It's much harder than if someone donates stock or money."

rona.kobell@baltsun.com

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