Donated use of facilities

[Gretel]

501(c)3 gets free use of office space. Landloard asks if he can deduct rental value as donation. I think he only can do this if he reports the rental income as well, which might be beneficial because of associated rental expenses.

I can not find anything on the web regarding this, only how an organization can report such a transaction.

Anyone knows? Thanks. Gabriele

[jainen]

not deductible either

>>he only can do this if he reports the rental income as well, which might be beneficial because of associated rental expenses<<

What "rental income as well" are your referring to? Surely you aren't suggesting he make up an amount to report as income for the sole purpose of being able to declare expenses?

Use of facilities is not a deductible charitable contribution, period. And because they are not ordinary and necessary business costs, expenses allocated to such use are not deductible either.

[sea-tax]

>>he only can do this if he reports the rental income as well, which might be beneficial because of associated rental expenses<<

What "rental income as well" are your referring to? Surely you aren't suggesting he make up an amount to report as income for the sole purpose of being able to declare expenses?

Use of facilities is not a deductible charitable contribution, period. And because they are not ordinary and necessary business costs, expenses allocated to such use are not deductible either.

I agree that the expeses allocated to the "rental" are not deductible. However would they not be at the very least investment interest and property taxes deductible on sch a?

Or could they not be capitalized and added to the cost basis of property so that when you sell you get some relief?

Not sure on this but just had a thought.

[jainen]

Sure!

>>would they not be... could they not be<<

Sure! In fact I don't know any tax professional (including myself) who would even bother with an allocation unless it was a major part of the property usage.

[Gretel]

[QUOTE=jainen]
What "rental income as well" are your referring to? Surely you aren't suggesting he make up an amount to report as income for the sole purpose of being able to declare expenses?

Of course, I am not talking about making up an amount. I am talking about FMV of rent. The only way I could see him taking a possible charitable deduction is, to declare the same amount as income. Would be a wash besides from landlords expenses.

Don't beat me up, but couldn't the rental expenses be seen as out of pocket expenses for purpose of charitable deduction?

Use of facilities is not a deductible charitable contribution, period.

Do you have any reference for this?

Thanks, Gabriele

[Jan]

Gabriele, See Pub. 526 page 8 "Partial Interest in Property" also J.K. Lasser has a good section on this.

[Unregistered]

but couldn't the rental expenses be seen as out of pocket expenses for purpose of charitable deduction?

Well they usually have been a charitable deduction, ordinary and necessary business deduction, advertising, or Sch-A depending upon the taxpayer and situation. Of course fair rental value for use is not deductible.

[jainen]

Yes you are

>>I am not talking about making up an amount<<

Yes you are. He never received any rent, but you suggest he declare it as income anyway, so he can then use that phantom income as the basis for additional deductions that would not otherwise be allowed.

Letting the non-profit use his facilities is a good thing in and of itself. It does not need to be supported with a government tax subsidy. And it isn't, either. If he needs a government tax subsidy to make his charitable donations worthwhile, he must structure them to comply with the law.

For example, he could donate cash (unconditionally) and let the organization pay rent (wherever they choose to). Or he could donate the entire building but retain the income stream through a charitable remainder trust.

[Jan]

Why don't they just rent it to the charity for FMV and deposit the money, then if they want to donate money to the charity, they could just donate the same amount of money to the charity and get a deduction on skd. A.

[Unregistered]

Why don't they just rent it to the charity for FMV and deposit the money, then if they want to donate money to the charity, they could just donate the same amount of money to the charity and get a deduction on skd. A.

Of course Jan... now why didn't some other expert think of that? excellent.

[jainen]

a little bit earlier

>>why didn't some other expert think of that?<<

Well, I posted that suggestion a little bit earlier.

[Unregistered]

Why don't they just rent it to the charity for FMV and deposit the money, then if they want to donate money to the charity, they could just donate the same amount of money to the charity and get a deduction on skd. A.

jainen >>why didn't some other expert think of that?<<

Well, I posted that suggestion a little bit earlier.

That probably entered everyone’s mind, nothing to boast about

[sea-tax]

That probably entered everyone’s mind, nothing to boast about

UR that statement is kind of uncalled for.