Charitable donation of real estate

[kathyc2]

I have a client that is considering donating a house to a charity. A little history: he has owned the house as a rental property for ~20 years. In 2011 he sold the house on land contract for 40K. The buyer defaulted and house went back to client. According to client the house was trashed in the interim and at this point basically unsellable. He doesn't have an appraisal yet, but he expects it to come in around 10K.

His basis is around 18K. Because of this I told him he would be better off to sell the house for 10K, take the 8K loss and then donate the 10K cash to charity. He's older and has health problems and really just wants to be done w/ this house.

Does anyone have any other ideas as to how to structure the transaction so he would get better tax treatment than the 10K charitable donation?

[Roland Slugg]

That's a very interesting and unusual set of facts, and the advice you gave him was sound. But if he doesn't want to go to the trouble to follow your advice, that's up to him. You are correct that if he donates the property to the charitable org, his deduction will be limited to its FMV, even if it is less than his basis, and there will be no deduction of any kind allowed for the difference between his basis and the property's FMV.