Firedepartment Donation

[cynthia@RV]

I have a client who donated an old house on his property to the local fire department for practise. They used it for 2 years and then he had the lot cleaned up and it is now just part of his homestead. He had the house appraised and documented for a value of $12, 000. Does this qualify as a charitable contribution and is the local fire department a qualified non for profit?

Thanks,

Cyn

[Pacun]

I am not sure if he donated a tangible asset. If he donated the place, you can use cost or FMV (whichever is lower) to calculate donation. If the land was only used for 2 years, I think your client cannot claim any donation.

[RoyDaleOne]

For example, a contribution of the right to use property, such as a rent-free lease, is treated as a contribution of less than the taxpayer's entire interest in property and, thus, no deduction is allowable.

Out-of-pocket expenses directly connected with and solely attributable to the performance of services for a qualified charitable organization may qualify for a charitable contribution deduction. Clean-up costs.... Not enough facts to tell...

[OldJack]

Well... just for the heck of it I will take the opposite view and say it is deductible. The taxpayer/owner of the house did not donate any land or use of land, rather they donated a building to a qualified organization. The fact is that the fire department took possession of the building and it is irrelevant that instead of removing the building they burned it. The gift with FMV of $12,000 was completed in full when the fire department accepted the building and took possession.

[RoyDaleOne]

If, what OldJack says is the facts, I would agree.

I think the cleanup would be also deductible.

[GeneInAlabama]

Another way to look at it is that the taxpayer received income in the form of a service of having an unwanted building removed from his property for free. He had cleanup expense after the house was burned, but the expense of having the house torn down and moved probably would have been greater. Just my thoughts on the matter.

Gene

[BulldogTom]

Well... just for the heck of it I will take the opposite view and say it is deductible. The taxpayer/owner of the house did not donate any land or use of land, rather they donated a building to a qualified organization. The fact is that the fire department took possession of the building and it is irrelevant that instead of removing the building they burned it. The gift with FMV of $12,000 was completed in full when the fire department accepted the building and took possession.

I am with OldJack too. He donated a building. The fact that it was consumed is irrelevant.

I am not sure about the cleanup, because he did not give that to the fire department. He merely cleaned up his Investment(?) property after it was used by someone burning a house (with his permission). On an aggressive day I might take that position, but I think I would be more conservative on the clean up costs and add them to basis.

Not sure about the cleanup, but confident about the building.

But if the fire dept used it for 2 years, the deduction should have been taken when title transfered. I don't know that you can get the deduction this year?

Tom

Lodi, CA

[Slappy Tax]

http://www.taxalmanac.org/index.php/Discus...nt_For_Training

[jainen]

>>He donated a building<

No he didn't. At least, it's very unlikely. As the original post said, the fire crew USED the building and then left it. The building was real estate which can only be legally transferred in writing. He probably had a contract, but if there was no recorded DEED the change of ownership is not applicable to third parties like the IRS. Didn't the owner continue to pay property taxes, maintain insurance, and plan to take care of the final clearing himself?

Demolition costs, such as cleanup, can be added to the basis of the land. He can't deduct the USE of the building. In fact, since the fire department demolished the building for him, he has deemed income equal to the FMV of the demolition.

[BulldogTom]

>>He donated a building<

No he didn't.

Maybe he did. I took "He donated a building" to mean he transferred title in a completed gift. You seem to believe he did not. Who is right? Only the poster knows, but I think that is the crux of the question. If he transferred title, I stand by my answer above. If no transfer, I will side with you.

Tom

Lodi, CA

[OldJack]

>>He donated a building<

No he didn't. At least, it's very unlikely. As the original post said, the fire crew USED the building and then left it. The building was real estate which can only be legally transferred in writing.

Oh Please! The fire department "USED" the building after they had accepted it as a donation. I guess you would think the same if they had moved it to the firehouse before burning it? No doubt the fire dept would or has given a letter acknowledging the donation. I for one have NEVER seen a paper title for only a building. Does it look like a car title or a land title? How many on here have see such? Lets have a poll.

As to the clean-up? Nothing was said about a cost of such only that the landowner did it. I would expect that if there were any costs it probably has to be added to the cost basis of the land.

As to deemed income for anything... ridicules.

[jainen]

>>you would think the same if they had moved it to the firehouse<<

Don't be silly. If they moved it, it wouldn't be real estate any more!

[joanmcq]

You can take a deduction IF it was documented correctly, but in the year of donation, not now. does he have a qualified appraisal? Did he transfer the property? The fact that it was still on his land is irrelevant, as long as title to the building transferred. Does he have a receipt? I did get one of these through audit, but it has to be done correctly. The fire department has to have complete control over it; no retrictions on how long or what they do to it (sometimes they won't burn it, but just punch a lot of holes etc). These donations have failed in TC cases where for example, the donor was going to have the lot cleared anyways and stipulated it had to be burned within 4 months, etc.

[cynthia@RV]

You can take a deduction IF it was documented correctly, but in the year of donation, not now. does he have a qualified appraisal? Did he transfer the property? The fact that it was still on his land is irrelevant, as long as title to the building transferred. Does he have a receipt? I did get one of these through audit, but it has to be done correctly. The fire department has to have complete control over it; no retrictions on how long or what they do to it (sometimes they won't burn it, but just punch a lot of holes etc). These donations have failed in TC cases where for example, the donor was going to have the lot cleared anyways and stipulated it had to be burned within 4 months, etc.

Thanks to all who have replied. I see that I have a lot more questions to ask my client. This is why I love this board so much!!!

Cyn

[Pacun]

Keep in mind that cost or FMV at the time of donation (whichever is less) will be used. So the $12,000, is not the number you will use (most likely).

[OldJack]

Keep in mind that cost or FMV at the time of donation (whichever is less) will be used. So the $12,000, is not the number you will use (most likely).

I expect it would be FMV of $12,000 since the house was not a business asset.

edit: Meaning the house is a capital asset v. a business asset (ordinary income asset), therefore FMV as it was to a qualified organization that used the house in its purpose. 2007 Quickfinder 1040, page 5-14, points out that it would be a 1040 Sch-A, 30% limitation of AGI type deduction.

[RoyDaleOne]

A donation for the use of the building is not available, because,

it is not the complete interest of the owner of the building. That is

the owner is going to get the use of the building back at some time in the future.

Only, a complete interest donation is deductible.

Yes, I know there are exceptions, however, I could not find that applied

to these facts.

However, if the donation was to consume the building by fire or demoilation

by the firemen then you may have a donation of the complete

interest of the owner in the building. This may give raise to

a deduction.

The clean up costs were incurred incidental to the the donation

of the building. Generally, incidental costs to a donation are deductible.