CONTRIBUTION OF REMAINDER INTEREST IN LEASED PERSONAL RESIDENCE QUALIFIED FOR DEDUCTION

Section 170 -- Charitable Deduction
UIL Number(s) 0170.01-00

FULL TEXT:

Date: December 12, 1986

Refer Reply to: CC:IND:I:3:2 - TR-31.2977-86

TIN:

LEGEND:
O = * * *

Dear * * *

This is in reply to your letter requesting a ruling that a gift of the remainder interest in your residence qualifies as a charitable contribution under section 170 of the Internal Revenue Code.

You propose to give a remainder interest in your residence to O, an organization described in sections 501(c)(3) and 170(c)(2) of the Code. You presently rent a portion of the property to an unrelated third party.

Section 170 of the Code provides, subject to certain limitations, a deduction for contributions and gifts to or for the use of organizations described in section 170(c), payment of which is made within the taxable year. Section 170(f)(3)(A) of the Code provides, in part, that in the case of a contribution, not made by a transfer in trust, of an interest in property that consists of less than the taxpayer's entire interest in such property, a deduction shall be allowed only to the extent that the value of the interest contributed would be allowable as a deduction under section 170 if such interest had been transferred in trust.

Section 170(f)(3)(B)(i) of the Code provides that section 170(f)(3)(A) shall not apply to a contribution of a remainder interest in a personal residence or farm.

Section 1.170A-7(b)(3) of the Income Tax Regulations provides that a deduction is allowed under section 170 of the Code for the value of a charitable contribution not in trust of an irrevocable remainder interest in a personal residence which is not the donor's entire interest in such property. Thus, for example, if a taxpayer contributes not in trust to an organization described in section 170(c) a remainder interest in a personal residence and retains an estate in such property for life or for a term of years, a deduction is allowed under section 170 for the value of such remainder interest not transferred in trust. Rev. Rul. 78-303, 1978-2 C.B. 122, holds that a retired farmer, a portion of whose farm is leased to an unrelated third party, may deduct as a charitabLe contribution a gift not in trust to an exempt educational organization of an irrevocable unrestricted remainder interest in a portion of the leased land in which the farmer retains a life estate.

Accordingly, based solely on the information submitted, we conclude that your proposed donation of a remainder interest in the residence to O will qualify as a charitable contribution deductible under section 170(a) of the Code in the manner and to the extent provided therein. The amount of the contribution is the fair market value of the remainder interest. Section 1.170A-1(c) of the regulations.

The calculation of the amount of the deduction will be the subject of another communication from the Internal Revenue Service.

This ruling is directed only to the taxpayer who requested it. Section 6110(j)(3) of the Code provides that it may not be used or cited as precedent.

Except as specifically ruled upon above, no opinion is expressed as to the federal income tax consequences of the transaction described above under any other provision of the Code.

You should attach a copy of this ruling to your income tax return for the taxable year in which the transaction covered by this ruling is consummated. We are enclosing a copy for that purpose.

Sincerely yours,

Richard H. Manfreda
Chief, Individual Income Tax Branch

Enclosures 2
Copy of this letter
Copy for section 6110 purposes