Ore. governor candidate Dudley took big tax break for allowing firefighters to burn his house

By Nigel Duara, AP
Thursday, October 7, 2010

Dudley gave house for fire training, got tax break

PORTLAND, Ore. — Republican Chris Dudley, a former professional basketball player now running for governor in Oregon, acknowledges he allowed firefighters to burn his house in 2004 in a posh Portland suburb as part of a training exercise for the local fire department and took a $350,000 tax deduction for it.

Dudley’s campaign also says there was nothing wrong it.

“He’s allowed under the law to take a deduction and he did everything by the books,” campaign manager Josh Ginsberg said Thursday in a statement. “It was legal, ethical and proper and any suggestion otherwise is completely unfair to Chris Dudley.”

But Oregon Democrats are using the revelation — first reported this week by the Willamette Week newspaper — as ammunition against Dudley in his tight race against John Kitzhaber, a former governor.

“Dudley seems to have no problem using public resources for his own gain while finding creative ways to get out of paying for them,” said Democratic Party of Oregon spokeswoman Amy Wojcicki in a statement.

The Internal Revenue Service would not comment on whether it would investigate.

It’s the second time in the gubernatorial campaign that Dudley has become a political target over a house.

Dudley moved to Camas, Wash. in the 1990s, while playing for the NBA’s Portland Trail Blazers, and has admitted he did so to avoid paying some Oregon taxes. Democrats have called for an Oregon Revenue Department investigation into whether Dudley cheated on his taxes by actually living in Oregon while claiming the Washington residence. Dudley did pay Oregon income taxes on his Trail Blazers’ salary.

The latest controversy involves a home in Lake Oswego, an affluent Portland suburb.

After retiring from the Trail Blazers, Dudley donated the 4,500-square-foot house to the Lake Oswego Fire Department to use in a live fire drill.

Dudley campaign spokesman Jake Suski said Dudley consulted with his accountants about taking a tax deduction, but didn’t check with the IRS. Suski said Dudley didn’t face an audit or inquiry from the IRS after he claimed the $350,000 write-off.

Ginsberg said the Lake Oswego Fire Department wrote a note of thanks to Dudley in which they said the drill helps them train and is good for the community.

“Chris Dudley provided a qualified appraisal of the property,” Ginsberg said. “His property met the safety and environmental standards for qualification and Chris paid for the removal of the debris following the training.”

Dudley replaced the burned house with one nearly twice as large, where he now lives.

Oregon Democrats claim the tax deduction amounts to tax evasion, and have suggested it could be tax fraud.

“The Dudley tax scandal has evolved from an admission of dodging Oregon taxes 13 years ago to evidence of tax evasion and now evidence of tax fraud,” said Democratic Party of Oregon consultant Josh Kardon.

Although letting a fire department burn your house and claiming a tax deduction is not unheard of, the IRS has begun fighting such tax breaks.

The Oregonian reported that the kind of deduction Dudley made is an issue in a Wisconsin case in the U.S. Tax Court. In that case, the court is considering whether a lakeside property owner outside Milwaukee can claim a $76,000 deduction for allowing firefighters to burn down a house he didn’t want. The IRS contends that claiming the full market value of the Wisconsin house was “excessive” and presented evidence that the house would be next to worthless if someone actually had to move it to another property.

IRS spokesman Richard Panick said the agency does not keep data on how frequently such donations are made.

“For any items of very large value, an appraisal is part of the documentation that would need to accompany the tax return,” Panick said. The IRS weighs the appraisal based on its completeness, the qualifications of the appraiser and the appraiser’s “demonstrated knowledge” of the property being donated.

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