Benny L. Kass
May 31, 2013
Q: I built my own house. At first, I stuffed receipts into a folder but toward the end when things got hectic, I forgot. I probably have receipts amounting to a quarter of what I believe I spent, land included. How can I establish a credible basis when it comes time to sell? The good news is the house is probably now worth a million and I think I spent less than $150,000.
A: We all have those stuffed receipts, although usually they are in a shoebox and not a folder. But all is not lost. Remember the song "I'm a Yankee Doodle Dandy." Its author was composer and entertainer George M. Cohan. Why do I mention this? Because the Cohan rule will assist you.
Oversimplified, Cohan did not keep good records; in fact, it appears that he did not keep any records, based on his busy schedule. When he included lots of expenses in his tax return, it was rejected. However, on appeal, Judge Learned Hand reversed the IRS ruling. The Cohan rule basically means you can estimate your expenses so long as you can show there is some basis for the deduction.
Therefore, can you prove that you made improvements to your house?
In the words of the court: "It is not fatal that the result will inevitably be speculative; many important decisions must be such."
Additionally, I have heard tax lawyers point out that section 274(d) of the tax code only requires substantiation for gifts, travel and entertainment. Since home improvements are not included in that list, you can rely on the Cohan rule.
However, discuss your situation with your own financial and legal advisers. I cannot provide specific legal advice.
Q: We bought a house in a semi-rural area about a year ago. We were seeking the peace and tranquility of the country, and the former owners told us how quiet the area was and how you could sit on the back porch and watch the deer in the meadows.
It seemed idyllic, until the weather started to warm up. Apparently, the 20-acre farm immediately behind our property also changed ownership last winter, and the new owners use every semi-pleasant day to shoot their guns. They also let friends and neighbors shoot their guns there, and it is almost like living next to a shooting range. It disturbs our peace and quiet and scares our dogs. We tried calling the police, but were told that as long as they weren't firing within 1,500 feet of a dwelling, it was perfectly legal.
We tried talking to the neighbor about this, but were basically told it was their property and they weren't doing anything illegal so too bad if we didn't like it. What are the chances of a private nuisance lawsuit working in a case like this? Can this type of lawsuit be brought without the help of lawyers?
A: Any lawsuit can be filed without the assistance of a lawyer (it's called "pro se"), but I cannot recommend it in your situation. To prove your neighbors are engaged in a private nuisance, you will need expert witnesses in addition to yourselves to tell the court, "Yes, they make so much noise with their guns that it disturbs sleep, scares kids, etc." You will also need to present case law on what are the elements of private nuisance.
To prove your case, there is a three-fold test. First, was your neighbor at fault? Next, has there been significant interference with you? Finally, was the neighbor's conduct reasonable? It will take a lot of time and research for you to meet these three tests.
I suspect that if the neighbors only shoot up their guns by themselves, you would not have a case. But if they have lots of friends over, then they may actually be conducting a shooting range, which may be illegal in your state.
Benny L. Kass is a practicing attorney in Washington and Maryland. No legal relationship is created by this column. Send questions to email@example.com.
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