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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4015
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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My question is two fold. I have an S corp with a commercial

Customer Question

My question is two fold. I have an S corp with a commercial building. I would like to donate the building to a 501 c 3 non profit. How does this work for me. Is my tax deduction an appraised value, or depreciated value, and how does it flow to me personally. Located in New York state
Submitted: 11 months ago.
Category: Tax
Expert:  Stephen G. replied 11 months ago.

Stephen G. :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything that is not clear.

Stephen G. :

Sorry for the delay, but your question required some research to determine the effective dates (which keep getting extended) of the accounting for the charitable contributions of appreciated property by S-Corps.

Stephen G. :

The "American Taxpayer Relief Act" extended the rules I'm about to describe to you for tax years 2012 and 2013. This was the law signed by President Obama on 1/2/2013.

Stephen G. :

Your charitable contribution of appreciated property by your S-Corp. will be at the appraised fair market value at the date of the gift. That contribution to a 501(c)(3) organization will be passed through to you on your K-1 for the year of contribution.

Stephen G. :

In addition, you will have to reduce your basis in the corporate stock by the tax basis of the property that you are contributing. That's where the continued extensions come in as previously you had to recognize gain on the difference between the tax basis of the property and the fair market value of the gift.

Stephen G. :

Technically, that is the current rule for 2014 as there has been no extension beyond 12/31/2013.

Stephen G. :

Of course, you will be subject to all the limitations on charitable contributions at the personal level and whatever you can't deduct due to income limitations, you will be able to carryforward for 5 years.

Customer:

Since I am unable to sell the building, does this allow me to get a tax break......and the building off my back?

Stephen G. :

Well, the tax break is the charitable contribution. Do you own the building free & clear at this point, ie. no mortgage?

Customer:

No mortgage...free and clear bldg will be appraised for about 90k

Stephen G. :

OK, do you understand about your tax basis reduction based upon the tax basis of the building & land?

Customer:

no

Stephen G. :

Whatever cost is remaining on the S-Corp books must be removed and the net amount will reduce your tax basis in the S-Corp stock.

Stephen G. :

Are you going to liquidate the corporation or will it continue to operate?

Customer:

operate because there is other real estate

Stephen G. :

Above, I mean cost of the donated building

Stephen G. :

Do you have a CPA who does your tax returns?

Stephen G. :

If not, you are going to need one for this transaction to make sure it is handled properly both on the S-Corp returns and your personal returns.

Stephen G. :

What is this organization going to do with the building? Use it?

Customer:

yes.....she wasn't sure about it and I just wanted an idea if I should continue in my negotiations subject to her approval..........yes they will use the building

Stephen G. :

If so, that will enable you to use your charitable deduction sooner.

Stephen G. :

Well, you should give her a copy of this conversation.

Customer:

I plan to....any problems in NY state?

Stephen G. :

It is possible that you could have a small (?) capital gain depending upon what your tax basis is in your S-Corp stock.

Stephen G. :

No special problems; may be different limitations.

Customer: I think that gets me pointed in the right direction...thanks
Stephen G. :

By the way, you can always come back to this conversation.

Stephen G. :

It will automatically switch to a Q/A format & it is not deleted.

Stephen G. :

I'll leave my contact information in case your or your CPA wants to reach me again.

Customer:

Thanks!

Stephen G. :

If you need to contact me again with any tax or financial questions, you can just ask for "Steve G" at the beginning of your question. Again, please remember to rate my response. Bonuses, where you think they are warranted, and excellent ratings, are always most appreciated. Thanks again for using JustAnswer.com.You may get a short survey from the site; if it isn't too much trouble I would appreciate it if you would answer it; the survey results are used to rate our performance;

Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4015
Experience: Extensive Experience with Tax, Financial & Estate Issues
Stephen G. and other Tax Specialists are ready to help you

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