charitable donation of purchase

[Bettie Cheek]

My client is purchasing foreclosed property. Land value is $13000 and home value is $74000 on tax statement. He wants to donate the mobile home and write off the $74000.
He will not pay that of course. Since it is foreclosure he will pay approximately $25000.
plus closing costs. What would be the value of contribution? Thanks

[ChEAr$]

I love these exercises.

My client is purchasing foreclosed property. Land value is $13000 and home value is $74000 on tax statement. He wants to donate the mobile home and write off the $74000.
He will not pay that of course. Since it is foreclosure he will pay approximately $25000.
plus closing costs. What would be the value of contribution? Thanks

The secret of success in accounting (and taxes many times) is Allocate and pro rate.

If he pays 25000$, then value of his donation (assuming it IS to a qualified organization; it is, right?) would be 25,000$ times 74/88. (Use your own calculator! (grin

But really, a mobile home with a tax value of 74,000$? This ain't the Ozarks, I reckon.

[WhiteOleander]

I would also tell the client that he MUST have a written appraisal for the donation. He can't just set the value himself.

[geekgirldany]

Must be one heck of a mobile home Maybe it is just a mobile home sitting on the land and there is another home on the property?

This sounds like one of those EA questions I've been studying for over a month.

[jainen]

one heck of a mobile home

>>one heck of a mobile home<<

Sounds like a bargain.

http://www.usatoday.com/money/perfi/housing/2005-07-05-million-dollar-trailers_x.htm

[Corduroy Frog]

Answer the Lady's Question

...you bozos.

Bettie, the amount deductible per your original question is the fair market value of the mobile home. From your post, it appears the gift does not include the land. If the mobile home is really worth $74K, then that would be the deductible amount, subject to a percentage of income just as any other gift.

As one post suggested, if the charity actually sold the mobile home for a certain amount, then that would be a better estimate of its value than the tax assessor's value. Others have suggested the property tax statement could very easily be flawed and I agree.

[jainen]

stupid incompetent fool

>>the amount deductible... is the fair market value of the mobile home<<

A bozo is "a stupid incompetent fool." You may think that describes me, but let's consider the term in the context of your own post.

One of the most basic rules of charitable contributions is that tangible personal property (like a mobile home) is limited to the lesser of FMV or adjusted basis unless the charity uses it for its charitable purpose. Even then, the deduction can't exceed adjusted basis unless it is long term capital gain property.

ChEAr$ and WhiteOleander answered the original question correctly, so then the thread moved on to consider whether the scenario was reasonable.

[Gene V]

I would say the deduction is limited to the property basis per TTB.

TTB page 4-16
Reduction to FMV. The deduction based on FMV of property may be reduced depending on whether the property given to charity is ordinary income property or capital gain property.

Ordinary income property. Deduction equals FMV minus the amount that would be ordinary income or short-term capital gain if the property were sold. Examples include capital assets held for one year or less. This rule limits the deduction for ordinary income property to its basis.

[geekgirldany]

Wow I am a Bozo

A bozo is "a stupid incompetent fool." You may think that describes me, but let's consider the term in the context of your own post.

Frog said bozos. I am honored to be a bozo along with you Jainen. I can't believe I have made it to that status on the board

Yes the question was already answered. Capital Gain Prop. is FMV or Ordinary Income Prop is lesser FMV or Adjusted Basis.

[Corduroy Frog]

Bozos?

I can't believe anyone thought I was serious - Jainen of all people you should know better. The webmaster will probably flush the post when he (she) wakes up...

[Kram BergGold]

Once again the answer is it depends

If the purchaser holds the mobile home for 1 year and a day then the deduction is FMV at time of the gift and an appraisal would be required. If the purchaser gives it away before 1 year and a day then the deduction is limited to cost. I would assume if the purchaser gives it away immediately that an appraisal is still required.