House Purchased For Use For Drug Rehab

[GeneInAlabama]

A new client has gone through drug rehab and wants to help others. He has purchased an old house and is fixing it up to be used for others going through the program. He will not be living in this house himself. Does anyone have any suggestions how this can be deducted on his taxes? I suggested that he might give the house to the rehab organization, but he wants to retain ownership. It is his way of repaying for the life that was given back to him. The client is in the remodeling businss. Any suggestions would be appreciated.

[Lion EA]

Maybe he should apply as a charity, Form 1023 or something, and sign ownership over to the charity.

[Terry O]

I'm sorry - -it has been a VERY LOOOOOOOOOOOOOOOOOOOOOOOOOOOOOONG year - -and I honestly thought the header was for a client who was purchasing a house to make drugs!!!

OY!

:wall: :wall:

[Lion EA]

Oh, a meth lab client. That would be interesting!

[joanmcq]

It's a business. Is it going to be a rehab facility, or a sober living house? The former provides counseling and other treatment to people just getting sober, and the latter is a shared living arrangement for people who have graduated from the former and require less supervision. If the latter, it's a rental, furnished and board is often provided. I know quite a few people that run sober living houses, but none of them are clients.

[Pacun]

I don't think this is a rental business since no one will pay rent. I would be incline to a second home rather than a rental. Technically, he is not renting it at FMV and that makes it personal.

[joanmcq]

Most sober living places out here charge $400-$500 a month for a shared bedroom. Why do you say he'd not be charging rent?

[Guest Taxed]

If he wants to retain ownership then he can rent it as a low income housing (get some tax credits may be) and hopefully collect some rent or he can start a trust or non profit for drug rehab.

I had an elderly lady client who had an "extra" house that was not needed and she donated it to a local charity that helped juveniles and took a charitable deduction over 2 years. But then she donated with the only stipulation that it can not be sold for profit and must be used for the charitable purpose.

[jainen]

>>how this can be deducted on his taxes?<<

Line 6 of Schedule A.

[GeneInAlabama]

Thanks everyone for the replies. I need to find out more information from the client about exactly how this house will be used. I have never had anything like this come up before.