Printer Friendly

Personal residence as charitable contribution.

Sec. 170(f)(3) allows a charitable deduction for a gift of a remainder interest in real property if the remainder interest is in a personal residence or a farm. The regulations describe a personal residence as any property used by a donor as his personal residence, even though it is not the principal residence; a second or vacation home would qualify.

Making this charitable contribution involves making an irrevocable transfer of a personal residence to a qualified charity, with the donor retaining lifetime enjoyment of the property. The donor may continue to reside in the house for life, while maintaining it and paying the required property taxes; the qualified charity will receive the house on the donor's death. In this way, the taxpayer will realize current income tax benefits as well as estate tax savings.

The regulations provide the necessary tables, formulas and rules for computing the value of the house's remainder interest. The retained life interest may be for one or two lives (e.g., until the death of the second to die of the husband and wife) or for a term of years concurrent with one or more lives. Several subjective decisions are required when computing the value of the remainder interest, such as the property's fair market value allocated between land and structures; the residence's estimated useful life; and the value of the structures at the end of their estimated useful lives. A transfer of property subject to a mortgage may have adverse income tax consequences to the donor and probably should be avoided.

Making the gift is relatively simple; a deed is the only legal document required and a gift tax return may have to be filed. There is no need to create a trust or to appoint a trustee. (In fact, a trust is not allowed.) The donor has the satisfaction of having made a current gift to his favorite charity, with very little change in the enjoyment of the property.
COPYRIGHT 1993 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Author:Grunkemeyer, Mike
Publication:The Tax Adviser
Article Type:Brief Article
Date:Mar 1, 1993
Previous Article:IRS rules on extended warranties.
Next Article:Homeowners must include ARM interest refunds as income.

Related Articles
Uncertainty of residuary estate's value voids charitable deduction.
Charitable contribution substantiation requirements for estates and complex trusts.
Charitable split-dollar insurance transactions.
Limits on individuals' charitable deductions.
Limits on individuals' charitable deductions.
2004 American Jobs Creation Act: selected highlights.
Charitable gifts of partial and undivided interests.
Conservation easements.
IRS revises allocation rules for charitable contributions.
Being charitable - without going broke.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters