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§ 3.1 MEANING OF GIFTIn this case, a married couple placed their two children with learning disabilitiesin a private school, rather than a public one, because of the inability ofthe public school to adequately serve the children’s academic needs. The couplerelied on the Individuals with Disabilities Education Act (IDEA) for the assertionthat they were entitled to reimbursement from the public school system forthe tuition and other expenses incurred in connection with their children’s attendanceat the private school. They endeavored, nonetheless, to forgive the system’sobligation to reimburse them for the expenses and claimed a charitablecontribution deduction for the amount forgiven.The IDEA prescribes a multistage administrative procedure by which individualsin these circumstances establish their right to reimbursement. The parentsof these children, however, did not avail themselves of that procedure. Oncebefore the court, they submitted an affidavit concerning their consultations witheducational, psychological, and legal professionals, who agreed with the parentsthat they had a valid claim for reimbursement. They also submitted a letter froman educational consultant they had consulted, who expressed the view that theparents were entitled to reimbursement. The court rejected these submissions asinadequate to support an “unequivalent obligation” on the part of the publicschool system to provide the reimbursement. 139A statutory path was open to this couple to attempt to establish the requisiteunconditional obligation, which could then have served as the predicate for aforgiveness. 140 But, as the court stated, “they didn’t elect to pursue that right.” 141The court referred to the couple’s approach as a “self-proclaimed unilateral decision.”142 This was not enough to adequately obligate the school system, so theattempt to make the forgiveness the basis for a charitable deduction failed.When situations like this are particularly egregious or are otherwise abusive,the courts have the authority to levy certain penalties. 143Another illustration of this situation is the carefully contrived circular gift. Acourt case illustrated the point. 144 The transaction involved three related organizations.One was a business league operated in support of small business interests(BL). BL was funded by an individual (A). A also established, with BL funds, acharitable organization (CO). A third organization was a for-profit entity (FP),owned 40 percent by A and 60 percent by BL. Upon application, FP would loanmoney to a borrower at a 3 percent interest rate, with no principal payment duefor 20 years. On the day the borrower received the loan proceeds, he or she wouldtransfer the funds to CO, along with a small contribution from his or her ownfunds. The borrower would then claim a charitable contribution deduction for theentire amount transferred to CO.The court found a “cooperative arrangement” among the three organizations,facilitated by the fact that A was the sole signatory on the bank accounts139 Id. at 90,440.140 20 U.S.C § 1415.141 Bond v. United States, 97-2 U.S.T.C. at 90,440.142 Id.143 See § 10.14.144 Allen v. Commissioner, 91-1 U.S.T.C. 50,080 (9th Cir. 1991). 77