Donation to fire dept

[tax francis]

Donation to fire dept for training on to-be torn down house=====a client bought a house to rebuild a new one. want to donate the house to fire dept for staff training purpose before being torn down. where goes the donation deductions? and the value?

Thanks,

FRANCIS

[kcjenkins]

The practical considerations in these matters are:

1. Determine whether the governmental unit is listed in Publication 78:

http://www.irs.gov/charities/article/0,,id=96136,00.html

2. Obtain an appraisal to serve as support for Form 8283. Your deduction is limited to 30% of AGI.

3. You need to carefully review the fact pattern surrounding the transaction. If the Taxpayer purchased the property with the intention of razing the property there is no deduction.

My feeling is that Reg. 1.280B-1 generally prohibits any deduction upon demolition of a structure and that IRC 170(f)(3) prohibits the deduction of a partial interest in property. Since the owner still retains the land, he has at best made a deduction of only a partial interest. I have only found one case supporting this idea, Scharf v. Commissioner, 32 TCM (CCH) 1247 (1973).

[RoyDaleOne]

I agree with kc except the partial interest. You can give a complete interest in the building.

However, this terms are words of art. For example, you can not give the use of the

building because that is a partial interest. The landlord will get the building back at

sometime. That is not the case if the building is destroyed.

I don't see where there is a deduction because of the taxpayers intent at the

time of purchase.

The land by itself was worth the purchase price and the building had no value.

Why else do what they are doing?

[GeneInAlabama]

My opinion for what its worth is that the fire department is doing them a service by helping them dispose of an unwanted building free of charge. How much would it cost to have the building torn down as opposed to the cost of cleanup after the building is burned. Kinda like giving the old refrigerator that has quit working to Goodwill and them haul it off for you so that you don't have to haul it to the landfill.

[OldJack]

>>The land by itself was worth the purchase price and the building had no value.<<

That statement is a tax preparer, or taxpayer, opinion only if there is no independent appraisal. We must remember that it is not our job to appraise taxpayers properties. An independent appraisal is "required" if the taxpayer wants a deduction. If he gets a qualified appraisal, has proper acceptance/receipt paperwork, meets the requirements as outlined by KC, then the taxpayer should have no trouble deducting.

[tax francis]

Donation to fire dept for training on to-be torn down house=====a client bought a house to rebuild a new one. want to donate the house to fire dept for staff training purpose before being torn down. where goes the donation deductions? and the value?

Thanks,

FRANCIS

Thanks, KC, ROY AND GENE for your help. If t/p could get a statement of "value of training" from the fire dept, and put

it into form 8285. would it work this way?

[kcjenkins]

One reason I mentioned the 'appraisal' is that it is possible, maybe, in some cases, that there would be a donation. If the owner could, for example, sell it to a salvage company for $5000, and they would demolish it and clean the site, and the cost of the owner clearing the site after the fire is $1000, then you could defend a donation of $6000.

But if you do, you better have good documentation to support your numbers. You want an appraisal of the building, written offers from salvage companies, etc. Not just the client's opinion on what he could have gotten.

[joanmcq]

In all of the cases dealing with this issue, intent had a lot to do with it. Because the taxpayers intended to demolish the building, the IRS will argue it had no value, or the taxpayers gained by the demolishion. Also, if the taxpayers require it be burned to the ground rather than letting the fire department do whatever they want with it, or put a time limit on when it must be 'used' by, it is not considered the donation of a full interest. Read the cases, and not only Scharf.

I had one of these come through audit and 1. The taxpayer had an appraisal. 2. Taxpayer had a deed transferring the structure to the F.D. 2. Taxpayer had done so 2 years earlier (by the time of the audit) and FD still hadn't done anything to the building. 4. Taxpayer had a receipt from FD. 5. Auditor was a lightweight.

[tax francis]

In all of the cases dealing with this issue, intent had a lot to do with it. Because the taxpayers intended to demolish the building, the IRS will argue it had no value, or the taxpayers gained by the demolishion. Also, if the taxpayers require it be burned to the ground rather than letting the fire department do whatever they want with it, or put a time limit on when it must be 'used' by, it is not considered the donation of a full interest. Read the cases, and not only Scharf.

I had one of these come through audit and 1. The taxpayer had an appraisal. 2. Taxpayer had a deed transferring the structure to the F.D. 2. Taxpayer had done so 2 years earlier (by the time of the audit) and FD still hadn't done anything to the building. 4. Taxpayer had a receipt from FD. 5. Auditor was a lightweight.

Thanks very much for your useful and practical info.

[RoyDaleOne]

The rules can be different depending on whether the property is

personal (residence), investment, or business(rental or used in a business).

The facts are not clear from the posting.

Appraisals are challenge by the IRS all the time.

For example, if you buy land and building today and tomorrow you

give the F. D. the rights to the building, the allocation of the purchase

price can be questioned. Because you end up owning only the land,

the question becomes why would you away part a valuable asset?

The apprasier most of the time should take the foreing in to consideration.

Unless the value of the house and the cost of the appraisal exceed

the value of the deduction why would you bother? So as a service to your client

you could estimate the allocation to see if it worthwhile to have an apprasial.

[TaxmannEA]

The problem that I see with this is that the taxpayer intends for the fire dept. to burn the building as opposed to his demolishing it. If he had given the property as a training structure to be used multiple times intact for SCBA training or attack drills, then there might be a deduction.

In this case, the taxpayer is probably looking for a low cost way to demolish in addition to providing the firefigters a valuable training tool. The landowner is providing a service to the department, but he probably will come out better financialy in the process. Our department burns a structure or 2 every year and the lesser cost as opposed to demolition is usually the big selling point to the owners.

[joanmcq]

I agree with TaxmannEA. That's why I think my guy came out on top; the FD was free to do, or not do, with it what they wanted, when they wanted to do it.