Donation of Real Property

Sounds like there are strings attached, and a possible smell test that gets flunked?

If there are no strings, a gift over 5000 requires a signed Form 8283 by a qualified real estate appraiser.

Property must be donated to the church, not the eventual third party.

And if there's any relationship between third party and the donor I wouldn't get near this.

Is this a case where the church must retain the property for 24 months before disposing of it, or donor is limited to lower of original cost basis or FMV at time of gift?

when do donations of real property become such cases?

I'll bite - Why are you not selling to the ultimate buyer and donating $11,500 cash to the church?

Well, it was, I thought, a simple case of land with a basis of $7200 with a buyer willing to pay $11,500. If we sell it first, there is capital gains to pay. If we give it to the church the whole $11,500 is a gift, with no taxes being paid. Knowing that the land is going to be sold by the church, we're just trying to avoid the hassle and expense of tiling to the church and then re-titling to the end buyer. My first thought was that, no, there is no way around this, and it will have to be titled to the church first. But, I thought I'd ask y'all and see if there was a way around it. It's all upfront and "passes the smell test". Client is giving the land to the church; we're the ones trying to see if we can streamline the transaction for him. I'm not aware of the 'must keep for 24 months' concept. Can someone elaborate? I'm off to the tax library for research!

And so it is. The appreciated part was missing from the OP.

Correct. Also, to take a deduction of more than $5,000 there must be an appraisal unless there's some way around that I don't know of.

There are some intervening use requirements regarding tangible personal property, but nothing I'm aware of that would apply in this case.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

Is the cost of that appraisal deductible?

Not as a charitable deduciton, but as a Misc 2% deduction.

Does the arm's-length sale immediately following the donation count?

Seth

A qualified appraiser signing the appraisal section is a requirement.

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Well, at this point it seems to me that what we need is a letter from the church to the client, accepting the gift. We need an 8283 signed by the appraiser. Now, the the real estate attorney says that the

1099 from the sale can be issued in the church's name and not the client, we don't need to make this a two step process. I see that as an issue for the attorneys, not the IRS. The mechanics of the sale should not really bother the IRS. As long as I document the gift properly, if the attorney feels it's kosher to have the 1099 in the churches name, I think we should be ok.

article,

Would you retain a tax attorney to close a real estate transaction? My experience with good real estate attorneys is they are well versed on real estate law but know little about tax law. (And the really good ones won't hesitate to admit it!)

Has anyone asked the church's attorney or tax preparer?

If this is the only time the church facilitates this sort of real estate sale, that one thing. If the church does this more than once, it could be facilitating a sham transaction for you, or at the very least could be unrelated taxable business income reportable on a 990T. And a good real estate attorney might never have come across a 990T ever.

Having read this thread, I will merely like to point out, that there is considerable risk that if audited, the IRS will invoke the Doctrine of Substance Over Form. The seminal case was the Supreme Court decision in Gregory v.Helvering 293 U.S. 465 (1935) followed by Minnesota Tea v. Helvering 302 U. S. 609 (1938). There have been a variety of cases since then as well as various guidance from the IRS on this subject. It is best summed up by a quote from the second Helvering case:

"A given result at the end of a straight path is not made a different result because reached by following a devious path."

Taking a charitable donation for the donation of real property without actual transfer of title to the charity, would in my opinion result in the IRS invoking the doctrine in any audit as the prime motivation would appear to be avoidance of taxation.

TP starts owning land worth $11,500. TP ends owning *nothing*. Church starts with nothing. Church ends with $11,500 cash.

It seems pretty obvious that the *primary* goal is to donate to the church. The form used minimizes the extraneous transaction costs in order to maximize the money the church keeps.

Seth

Substance over form is a doctrine the IRS uses to increase tax revenue. I am confident that the IRS will not accept a substance over form argument from a taxpayer intended to lower that taxpayer's tax liability.

Transfer title to the church and let the church do what it will with the property.

Don't forget the appraisal.

Thank you all very much for the discussion. While I think we would have a good argument with the IRS that the end result was proper, the bottom line is that I would not want to bother defending the transaction with the IRS if the issue ever came up. We are just going to transfer the property, with an appraisal, to the church. Our office is done at that point. What the church does with it is their business.

If the appraisal is given to the church (presumably, to assist it in getting the best price should it choose to sell) is the cost of the appraisal then a charitable contribution to the church?

Seth

No. It's a miscellaneous itemized deduction subject to the 2% haircut. See IRS Pub. 526.

Ira Smilovitz

I would guess the appraisal is your own expence to allow you to file a form 8283 and receive a tax deduction. I vote for a misc 2% deduction.