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WebCPA
WebCPA, Tax Accountant
Category: Tax
Satisfied Customers: 110
Experience:  Licensed CPA. 10+ years experience.
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Regarding a 501(c)(3) public charitable Foundation established

Resolved Question:

Regarding a 501(c)(3) public charitable Foundation established to preserve and protect the historically significant architecture of the EB GREEN Twentieth Century building, which has NY Sate and National Historic designation, to maintain the integrity of the buildng and its material construction. Questions: The building was constructed over several years from 1884 to 1920's. Can the Foundation accept as tax deductible donations to replace worn out carpet, light fixtures and renovation of rooms, including lighting fixtures, wall and window coverings. Leaky plumbing replacement, kitchen equipment threatening a kitchen fire or flooding, replacement of bathroom leaky,worn out commodes, sinks?
Submitted: 1 year ago.
Category: Tax
Expert:  WebCPA replied 1 year ago.

Welcome and thank you for your question. I'll do my best to provide an informative answer. Please let me know if you need any clarification.

 

Assuming the charity has applied for and received 501(c)(3) status, then yes the organization can accept tax deductible donations to perform the necessary restoration of the building. This is especially true given that the purpose of the organization is to preserve and protect this historically significant building. Any of the above noted restoration items directly relate to the purpose and mission of the organization. If not for donations received for the above building work, the organization would not be able to carry out it's mission.

 

Note that nonprofits must report and pay tax on unrelated business income. In the above case, I don't feel this applies given that the money raised is directly supporting the cause of the organization.

 

If you need further information please let me know.

Kind regards

Customer: replied 1 year ago.

Hello, you have partially answered my question. Unanswered is: Can a
donor giving a rugs or light fixtures to replace worn out lighting and
carpeting in the building receive a tax deduction letter from the
foundation? Can you give me the IRS code number that addresses this
situation? Thanks, XXXXX XXXXX

Expert:  WebCPA replied 1 year ago.

Greetings,

Sorry - I couldn't tell from your question you were referring to donated property (as opposed to cash).

Deductibility of donations can be found in Code section 170.

Yes, individuals are permitted to donate personal property and receive a deduction equal to the lesser of the fair market value of the property or the cost basis of the property as long as they donate the entire interest in the property (not a partial interest); Section 170(a)(3).

Deductions for capital gain property are limited to 30% of AGI instead of the normal 50%; 170(b)(1)(C).

Also, please refer to IRS Publication 526 regarding Charitable Contributions:

http://www.irs.gov/publications/p526/ar02.html#en_US_2011_publink1000229754

In the Publication, see the section regarding tangible personal property put to unrelated use. This type of contribution would not be deductible. In the situation you described above, it does not sound to me like unrelated use because the donated items are specifically for the purpose of the exempt organization.

Hope this helps the other part of your question. If you need anything else please let me know.

Thank you

Customer: replied 1 year ago.

Hello, Thanks for your response. For some reason the software will not
allow me to respond to you when I click on the "REPLY" as directed.
Therefore I am replying to your email directly. I am still uncertain
if the IRS Code 526 relates to the 501(c)(3) or to the donor. Can you
direct me to the IRS code for the operation of the 501(c)(3)
acceptance of the donations outlined? This should end my question
situation. Thanks for your followup.


 


Jo Ann

Expert:  WebCPA replied 1 year ago.

Hello,

Subchapter F of the Code covers exempt organizations. This includes sections 501 through 530. Section 501(c)(3) is a small part of Subchapter F that simply defines a type of exempt organization. You may find all of section 501 helpful. Section 503 discusses requirements for exemption. Here is a link to all of Subchapter F:

http://www.law.cornell.edu/uscode/text/26/subtitle-A/chapter-1/subchapter-F

Reading Code is not fun at all, so I would also like to provide you a link to IRS Publication 557, "Tax Exempt Status for Your Organization":

http://www.irs.gov/pub/irs-pdf/p557.pdf

Page 16 discusses donated property and I find this entire publication rather useful.

I do believe that Code Section 170, where it defines charitable contributions, allows for the contributions of property. Even though it speaks to the donors side, the exempt organization would still be in receipt of a properly donated property contribution if it meets the definition in Section 170. Please see the link here:

http://www.law.cornell.edu/uscode/text/26/170

And this section speaks to the sale of donated property (although the above publication 557 is more informative):

http://www.law.cornell.edu/uscode/text/26/6050L

I know all of this is pretty confusing, but I've dealt with similar situations in practice. I've never seen a charity have problems for accepting donated property. Just be sure the proper appraisals are done if required and the 8282's are filed if property is sold.

Kind regards

WebCPA, Tax Accountant
Category: Tax
Satisfied Customers: 110
Experience: Licensed CPA. 10+ years experience.
WebCPA and 2 other Tax Specialists are ready to help you

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