Category: Charitable Contributions Copyright 1998, The Tax Resource Group. All rights reserved. Telephone 800-578-3498. Internet: www.taxresourcegroup.com Charitable Use of Rental Property The taxpayer owns various rental properties, some of which are used partially for personal purposes. The taxpayer often donates use of one of the properties to a charity for a period of time, say one week. What are the tax ramifications? First, the period of time during which the taxpayer allows a charity to use the property is considered personal use by the taxpayer. See Rev. Rul. 89-51, 1989-1 CB 89, and Alvin Baker v. Comr., 45 TCM 635 (1983). This must be taken into account for purposes of Section 280A. Second, the taxpayer can only deduct his out-of-pocket
expenses related to charitable use of the property. Baker addresses
this point, although obliquely. It is clear, however, that the taxpayer
cannot deduct the fair rental value of the time donated to the charity.
The taxpayer has no tax basis in this foregone revenue; accordingly, there
can be no deduction. Also, rent-free use of property is considered the gift
of a partial interest in the property (not in trust) and is thus nondeductible
under Section 170(f)(3). See Regs. Section 1.170A-7(d), Example (1) and
Mathis v. Comr., 51 T.C.M. 1067 (1986). |
