Home received as donation

[mario100]

Interesting scenario. I have a new client who received a home from a non-profit. They also received a Form 1099-Misc with Box 3 filled in with an amount of $250,000. Is there a way this can be reduced for the benefit of the taxpayer? I don't see how, but wanted to see if anyone knew of something or somewhere I can look...if anything. Thanks!

[ATSMAN]

I don't think so. Few years back A client of mine told me that his daughter received a car from a non-profit that she was involved. The 1099-Misc was issued with box 3 for $3000. It was taxed as other income.

[Rapid Robert]

Is there a way this can be reduced for the benefit of the taxpayer?

Yes, decline to accept the house.

[Uncle Sam]

It's extremely unusual for a non-profit to gift an asset to a private individual - as it's against the purpose of a non-profit. There are circumstances that you haven't told us as to how this situation arose.
Was it in lieu of salaried compensation, a gift for exemplary service, or was there a string attached to the transfer such as mandatory continued service to the non-profit?
Anyway - a FMV valuation should have been a discussion point involving the transfer. How was the $ 250,000 valuation arrived at for 1099 issuance?

[BP.]

something or somewhere I can look...if anything.

TTB 3-16 - If FMV is lower than reported on 1099-MISC.

[Rapid Robert]

TTB 3-16 - If FMV is lower than reported on 1099-MISC.

That is assuming it was a prize, which I wondered about. Of course, if they get an appraisal and it turns out that FMV is more than what was reported on 1099-MISC, the ethical taxpayer would report the higher amount - fat chance, right?

[JON]

Why would it be on a 1099? Gifts do not go on a 1099. There are local nonprofits that fix up autos and sell them, but also give cars that should the financial need. They do not give out 1099s for those. It gets a little more trouble some if you buy tickets to get into the drawing. The on I saw 40 years ago the JCs had drawing for a new house if I remember right it was like $500 or $1000 for the ticket. My daughter was in this club and one of the other Dads had purchased a ticket and wanted to know if anyone else wanted a piece of the action. No one did - he won got the 1099 paid the tax by selling his existing loan and then got a mortgage for some additional spending money.

[Rapid Robert]

The OP has not been back yet, but it is interesting to note that the title chosen was "Home received as donation".

(I do wish that when people put important facts in the title, they would repeat them in the text of the post).

Now what could that mean? If the taxpayer was actually the recipient of charity, then it wouldn't be taxable at all, correct? Also, a minor quibble, "home" could mean many things. Was this actually real property, or some other place to live?

Maybe the taxpayer is a business providing home care services for juveniles or seniors or some other community-oriented purpose, and the donation from the non-profit was to facilitate this activity (in line with the mission of the non-profit)

regarding comments made in post #4 - from 1099-MISC instructions:

"Also enter in box 3 prizes and awards that are not for
services performed. Include the fair market value (FMV) of
merchandise won on game shows. Also include amounts
paid to a winner of a sweepstakes not involving a wager. If a
wager is made, report the winnings on Form W-2G.

Do not include prizes and awards paid to your employees.
Report these on Form W-2. Do not include in box 3 prizes
and awards for services performed by nonemployees, such
as an award for the top commission salesperson. Report
them in box 1 of Form 1099-NEC.

Prizes and awards received in recognition of past
accomplishments in religious, charitable, scientific, artistic,
educational, literary, or civic fields are not reportable if:
• The winners are chosen without action on their part,
• The winners are not expected to perform future services,
and
• The payer transfers the prize or award to a charitable
organization or governmental unit under a designation made
by the recipient. See Rev. Proc. 87-54, 1987-2 C.B. 669."

[mario100]

Thank you for your replies. I have been trying to contact the client, but no reply as of yet. Here is what I do have/know. This is individual works for the non-profit, they are not financial stable, so the non-profit allowed them to stay in one of their homes for free. The taxpayer lived there just under a year, and then was informed that the non-profit would be given them the house. After some discussion, they understood that they would be receiving a 1099 form, which they did not fully understand, which is why them come to me. Do I need to contact the non-profit? And what would I ask? And I don't know if they would talk to me. Again, I'm trying to make sure what I can do to help the taxpayer, if anything at all. Could this have been entered into Box 7, but that would be for self-employed income, which this is not. Thank you.

[Lion]

If your client works for the non-profit, they DO have a business relationship. If the non-profit gave your client a house due to the business relationship, then it IS compensation. If the non-profit gives houses to others that have NO relationship with the non-profits, then maybe it's not compensation. But, you have a lot of due diligence to do here. And, that disclosure Form 8275 might be your friend if you keep this client.

[ATSMAN]

Thank you for your replies. I have been trying to contact the client, but no reply as of yet. Here is what I do have/know. This is individual works for the non-profit, they are not financial stable, so the non-profit allowed them to stay in one of their homes for free. The taxpayer lived there just under a year, and then was informed that the non-profit would be given them the house. After some discussion, they understood that they would be receiving a 1099 form, which they did not fully understand, which is why them come to me. Do I need to contact the non-profit? And what would I ask? And I don't know if they would talk to me. Again, I'm trying to make sure what I can do to help the taxpayer, if anything at all. Could this have been entered into Box 7, but that would be for self-employed income, which this is not. Thank you.

Be careful. It smells like property given in lieu of compensation. I would require a written explanation from the non-profit if it was compensation or gift or something else. Don't stick you neck too far out without knowing the real reason. Your client should tell the employer that you will be contacting them for clarification or go to the meeting with you personally or by phone so that everyone is on the same page. BTW I would charge an hourly fee for a meeting like that.

[Uncle Sam]

Mario - you need to speak to a financially responsible person at the non-profit to determine the facts and circumstances surrounding the issuance of the 1099. It's quite unusual for a tax-exempt entity to "gift" n asset of the non-profit to an individual connected with it. There should be organization documents or by-laws of the tax exempt that discuss a disposition of assets policy. Is this related to a religious institution that involves parsonage allowance?