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Tax advice - depreciated property sold & proceeds to charity

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We are a 401 c(3)...
We are a 401 c(3) charity registered in the State of VA. We have a potential donor - a married couple who are residents ofthe State of FL. They jointly own two rental properties in the State of FL (condos). They have owned both properties for two years. If they sell both properties, take a loss on their taxes, and then donate the proceeds to the charity (us), can you explain to me the IRS Code that governs the sale of depreciated property to a charity and allows a married couple/donor to take that loss on their tax return? And approximately what % or amount of tax deduction could we forecast they might be able to take without knowing their income tax bracket - are their general 'rules of thumb' here governing depreciated property being sold at a loss and being donated to charity? I'm looking for the corresponding IRS tax code to reference to the donor. And what special issues apply here given that it's rental property, not the donor's personal residence, that is being sold at a loss, and donated to charity.
Submitted: 7 years ago.Category: Tax
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Answered in 2 days by:
10/4/2010
Tax Professional: Brenda Guy, Certified Public Accountant (CPA) replied 7 years ago
Brenda Guy
Brenda Guy, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 151
Experience: 20 years of working with income and estate tax issues for families and businesses.
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Brenda Guy :

The sale of the rental properties and the donation of the proceeds to charity are 2 separate and unrelated transactions. They can take the loss on the properties under the passive loss rules of section 469. As far as the donation of the proceeds - that donation is limited to 50% of their adjusted gross income and any unused contribution deduction is allowed to carry forward to future years.

JACUSTOMER-v68uy71j- :

Thanks for your reply. To clarify, is it possible to say what the seller receives as an approximate tax deduction % under Section 469 for the sale of this depreciated rental property without knowing their income tax bracket? In regards XXXXX XXXXX donation of the proceeds of this sale, is limited to 50% of AGI regardless of the source - it could be from the sale of this depreciated real estate, sale of appreciated stock, etc? Or does the deduction vary based on the source of this funding of the donation to our charity?

Brenda Guy :

Yes, it is correct to say that the seller receives a tax deduction of ?% under 469 for the sale of the rental property.

Brenda Guy :

The donation of the proceeds is subject to the rule of 50% of their AGI. This rule applies regardless of the source of fund for the donation.

JACUSTOMER-v68uy71j- :

So the tax deduction the couple receives for the sale of the depreciated rental property under 469 isn't known as a result of not knowing their income tax bracket is what you are saying? If so, I'm good to go....

Brenda Guy :

Correct.

Brenda Guy
Brenda Guy, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 151
Experience: 20 years of working with income and estate tax issues for families and businesses.
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