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We are donating a 99 year lease of 5 acres to a non-profit.

We are donating a...

We are donating a 99 year lease of 5 acres to a non-profit. The current value of the 5 acres is probably worth about $100,000. after the land is appraised, can we declare a contribution of the value of land on our tax return? We would have just donated the 5 acres outright without a lease, but the county will not allow a parcel of less than 20 acres.

Accountant's Assistant: Can you tell me where the nonprofit is registered?

I do not know the answer to that question. I know they have told all their donors that donations are tax deductable. This is in the state of Idaho

Accountant's Assistant: Has anything been filed or reported?

NO, this is the beginning of the donation.

Accountant's Assistant: Anything else you want the lawyer to know before I connect you?

Not that I know of

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Answered in 50 minutes by:
6/1/2017
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,644
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi My name is Lane

...

I hold a law degree, with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice since 1986.

Bear with me just a moment and I’ll provide my initial response and then we can go from there if you have further questions on this

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I'm so sorry, but no there has to be an actual change of ownership on (a re-titling of) the real property in question.

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A tax rule known as the “partial interest rule” prevents a charitable deduction in these circumstances. This rule generally allows a deduction only if the donor contributes the ‘entire interest’ in the property, or an undivided share of the entire interest.

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The IRS specifically addresses these situations with an example in its Publication 526 regarding Partial Interest in Property. “Example 1. You own a 10-story office building and donate rent-free use of the top floor to a charitable organization. Since you still own the building, you have contributed a partial interest in the property and cannot take a deduction for the contribution.” Read more here.

...

So again, so sorry, but bot***** *****ne, the only way the owner of the property can get a tax deduction is by donating all or a part of the property ownership to a qualified charity

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Have you considered putting the charity on the deed as a partial interest owner?

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Under Code Section 170, a deduction is allowed for a charitable contribution of a partial interest in property made in qualifying form. One type of partial interest gift that qualifies for the charitable deduction is a gift of a remainder interest in a personal residence or a farm.

...

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One of the exceptions to the general rule against deducting gifts of partial interests is that the donor can deduct if he or she gives all or and “undivided portion” of his or her ownership interests.

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So the remainder/life estate technique works ... and something that might be a GREAT fit to gift % of the 20 acres as tenancy in common.

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The “tenants in common” ownership form differs from the “joint tenants” ownership form in that if one “joint tenant” dies, the remaining “joint tenants” receive the deceased tenant’s ownership share, whereas if one “tenant in common” dies, the other “tenants in common” have no automatic inheritance rights.

...

This makes this a gift of full interest, or to fit it to the IRS guidance, "or an undivided share of the entire interest."

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Please let me know if you have ANY questions at all, before rating me.

If this has helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

That’s the only way JustAnswer.com will credit me for the work here.

Thanks,

Lane

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Hi,

...

I’m just checking back in to see how things are going.

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Did my answer help?

If this has helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

...

But if you need more on this, please let me know.

Lane

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,644
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Tax Specialists are ready to help you
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Customer reply replied 1 year ago
One more question for Lane. The total acreage of the parcel is 100 acres. We give them an undivided interest of 5 acres, and the total acreage is accessed at $800,000, would the donation be worth $40,000?
Customer reply replied 1 year ago
08 June 2017 12:35
One more question for Lane. The total acreage of the parcel is 100 acres. We give them an undivided interest of 5 acres, and the total acreage is accessed at $800,000, would the donation be worth $40,000?

Yep, that's right.

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5/100 = 0.05 or 5%

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and 5% of 800,000 is (800000 x .05) = 40000

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