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Marie

non profit contributions

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taxpayer loaned money to a non profit.  can he forgive the loans and they use the amount for a charitable contribution in the year he forgave the laon?  These loans were made 2 years ago.

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I think the better solution is to have the charity write a check to pay back the loan, then write a check back to the charity and get a receipt.  

Not saying your plan won't work, but I would have a hard time documenting the forgiveness to the level that would pass IRS standards.

Tom
Modesto, cA

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On 5/26/2020 at 8:20 AM, BulldogTom said:

I think the better solution is to have the charity write a check to pay back the loan, then write a check back to the charity and get a receipt.  

Not saying your plan won't work, but I would have a hard time documenting the forgiveness to the level that would pass IRS standards.

Tom
Modesto, cA

I agree with the check-check solution.  As for the receipt, do you mean the formal letter acknowledging the gift?   Does the non-profit have enough funds to write the check?  It may be that they are having problems making payments, which could be the reason for the loan forgiveness.   

I think the problem with Marie's plan to amend is the acknowledgement letter, as that has to be contemporaneous with the gift.    A possible solution would be for the client to write a letter to the N.P. forgiving the balance of the loan as a donation.  The NP would then send the client the acknowledgement letter. 

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The solution Max mentioned about a written forgiveness of the loan and converting to a contribution is what I have used with clients years ago.  There were, I think, one or two small principal repayments but the balance was then forgiven.  The church issued an acknowledgement at that time as the gift was as of the date the loan was forgiven.

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On 5/26/2020 at 7:44 AM, Marie said:

can he forgive the loans and they use the amount for a charitable contribution in the year he forgave the laon? 

Yes, forgiveness of non-business loan is a gift, whether it be to son, daughter,  charity or next door neighbor.

 

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