170(e)3 as it pertains to real estate

170(e)3 as it pertains to real estate

Forum topic posted in Forum on 9 August 2008| 5 comments
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P D
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Joined: 08/09/2008
Points: 180
I run a nonprofit where we find living organ donors for patients needing transplants. We currently have the largest living donor database, and we have facilitated the most altruistic living donor nonrelated transplants in the world. These patients, donors and their families usually need to stay in a hotel before during and after the surgery for sometimes up to three months. We recently saved the life of a contractor who now wants to donate three condos to us free and clear; so we can put up these future patients and donors. A sort of Ronald McDonald House. Each condo is currently for sale for $285,000 each, and he owns them free and clear.He wants to donate them under the IRS code 170(e)3 so he can get an accelerated tax benefit. His company is a C corp. Does anyone know if this donation will qualify under 170(e)3? Thanks, Paul Dooley

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P D
Offline
Joined: 08/09/2008
Points: 180
170 (e) 3
The contractior wants to know if we use it to house patients waiting fopr transplants if he can get an accelerated tax benefit. Any ideas?
Offline
Joined: 08/12/2002
Points: 105
Donation Of Condos
Let me see if I understand the problem: You "saved the life of a contractor" and now he wants to "donate three condos to us free and clear". I think the next step would be for him to find a grant deed and make sure the (i) description of each property is correct and (ii) the name of the charity is correct, and then get the deed recorded as soon as possible!! Oh, the tax consequences? Let's see. He owns the "C" corporation 100%. That's a taxable distribution of 3 X $285,000 = $855,000. He owes - what? - $340,000 in income tax and he has a deduction. What's not to like?
P D
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Joined: 08/09/2008
Points: 180
170 (e) 3
Would the 170(e)3 give the c corp the double tax advantage? Also, we do noty intend to sell these properties per 170(e)3, but can we ever sell the properties? If so how soon?
Doug Morrow's picture
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Joined: 01/30/2007
Points: 15
170e(3)
http://www.gftw.org/docs/AcceleratedTaxBenefit.pdf I found the above work by this charity to be helpful. May have an educational component as well. Doug Morrow doug.morrow@mac.com
Charles McLucas's picture
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Joined: 03/03/2002
Points: 15
3 condos inside C-Corporation
Chuck McLucas I am assuming the condos are inside a C-Coprpoation and that is your big concern. If you donor ownes them individually then, obviously, he could donate them to you directly or put them in a CRT or GA if he needed the income. If they are in the C-copr then that is a much more difficult situation as there may be a level of tax in the corportation that it will have to pay if the properties are donated by the corp. to your organization. The corp. could receive a deduction, subject to a 10% limit of net income that might help, but the amount of profit between the corp's cost of the units and the FMV would probably be taxable. There is an attorney here in Southern California that has a technique to possibly avoid the corp. tax, but it is an expensive process and I am not sure the cost is justified for a transaction under $1.0 million. Since the condos may be inventory to the corp vs. capital gain property the deduction will be limited to the cost basis of each condo vs. the FMV. Not a favorable, but if he really wants to make the donation to you it could work out fine for him. Since you will using the properties they should be considered "Qualified Contributions" under 170 (e) (1) (B) (3) and that might help the situation also. Hope that helps you. Please feel free to contact our office at 714.508.9100 should you have additional questions.
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