Rental to Charity

[Tracy Lee]

New TP was told by a friend that he donates his rental to charities and is able to expense that out as a charitable contribution and get a 'HUGE' tax break.  My research shows that he can only claim the contribution, on his Schedule A, if he claims the FMV of the rental as income.  Where might I find the facts on this?  Is there a PUB that spells this out so I can show him in black and white how this works?  I have never had this situation before.

[kathyc2]

Pub 526.  Particularly page 12 Giving property that has increased in value

[Abby Normal]

It's just common sense that you can't claim the deduction, without claiming the same amount as income, because you have no basis in the deduction.

The win here is that you can claim expenses against the rental income, and maybe get it down to very little income or even a loss. I don't see any issue with that as long as it's FMV rent to an unrelated 3rd party.

[BulldogTom]

1 hour ago, Abby Normal said:

It's just common sense that you can't claim the deduction, without claiming the same amount as income, because you have no basis in the deduction.

The win here is that you can claim expenses against the rental income, and maybe get it down to very little income or even a loss. I don't see any issue with that as long as it's FMV rent to an unrelated 3rd party.

@Abby Normal  HMMMMM.....  Can a Passive Activity be a vehicle from which you give charitable gifts?  Rental is passive by IRS definition.   I don't see a place on the Sch E for charitable contributions.   Even if you could give "rent" to a charity, it would have to be an organization and not for the benefit of a designated person, so I am having a hard time coming back to any way this scheme gets deducted on residential rental property other than gifting the entire property at FMV to a legitimate charity.

Am I missing something?

Tom
Longview, TX

[kathyc2]

Are you talking about donating the house to the charity, or keeping title and letting charity use it tax free?  If the former see Pub 926. If the latter see this: https://www.law.cornell.edu/cfr/text/26/1.170A-7

 

[joanmcq]

I think they are talking about letting the charity use it tax free.  At least that's how I read it!

[DANRVAN]

On 3/30/2024 at 9:25 AM, Tracy Lee said:

show him in black and white how this works

Refer to Reg 1.170A-7 (a) for a transfer of less than entire interest in property.

 

[DANRVAN]

On 3/30/2024 at 9:25 AM, Tracy Lee said:

Where might I find the facts on this? 

RR 89-51 involved a similar situation where the use of a vacation home was donated to a charity:

"Neither A nor B is entitled to a charitable contribution deduction. The gift of the right to use property is not a deductible contribution"