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Deduction for rent donation?

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Deduction for rent donation?

A donor to our nonprofit Hindu temple allowed us to use his investment property as housing for our priest. He refused to take the token rent we offered him and asked that it be counted as a donation. When we give him a donation letter at the end of the year, should we add this rent amount to the cash amount that he donated? Or should we spell it out differently?

You should not add the free rental value to the value of his cash contribution in your acknowledgment letter because it is not deductible as a charitable contribution.  The value of free (volunteer) services or free or reduced rate use of facilities is not deductible for federal income tax purposes.

You may certainly thank the owner for his generosity and you can acknowledge it in your donation letter.  But the rent acknowledgement should be separate from the cash acknowledgment.  If the donor claims the rent as a contribution deduction, you don’t want to be accused of assisting him in claiming an improper deduction when the IRS looks at the acknowledgment letter.

You can acknowledge his gifts in your internal materials, if you wish, along with donors of cash to the temple.  Free rent is of real value to you, just as volunteer hours are of real value.  But neither is deductible.

Tuesday, March 25, 2014

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