Even "allowable" charitable deductions count under bargain-sale rules

Article Abstract:

The Tax Court ruled in Hodgdon v Commissioner in 1992 that a taxpayer who had contributed to a charity by selling it property at a very low price nevertheless had to use the special basis rule in computing taxable gains from the sale. The special basis rule requires that the adjusted basis for calculating earnings from a bargain sale will be in proportion to the difference between those earnings and the fair market value of the sold property. Taxpayers ought to scrutinize the full results of contributions before making them.

Cases, Basis (Taxation)

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Timing of charitable contribution and intent

Article Abstract:

An IRS technical advice memorandum (TAM) holds that the intent and timing of a charitable contribution of real property are integral to its valuation. The decision turns on the question of when the valuation took place, as well as the actual underlying nature of the arrangement. The TAM holds the taxpayer had not acquired the property's improvements so he could not donate them. The charity's prearrangement with the taxpayer to receive the property after renovation directly impacts the valuation of the contribution.

Public Finance Activities, Personal Income Tax Deductions, Educational, religious, etc. trusts, Educational, Religious, Charitable Trusts, Grantmaking Foundations, Donations, Tax deductions, Personal income tax, Charitable trusts

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Charitable contributions and bargain sales of real estate continue to proliferate

Article Abstract:

Bargain sales of real estate are viable methods of making charitable contributions which are tax advantageous. Persons anticipating such sales should refer to the many changes in law affecting charitable contributions, such as those in the Taxpayer Relief Act of 1997. Attention should be paid to valuation as it is a matter of IRS scrutiny. Alternative minimum tax should also be considered.

Valuation, Real estate appraisal

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