A prominent real estate broker in our community wants to give our small 501(c)(3) historical society an old barn at the rear of his property. We don’t have any particular need or use for it, but he says his neighbor across the street would be happy to take it from us for his own use. The donor says his neighbor doesn’t want to pay for it, but would be willing to have it relocated on his property. Should we participate in this transaction?
I can’t imagine why. The only reason he wants to involve you in the transaction is probably so that he can claim a charitable contribution deduction, by “using” your tax exempt status, for something that doesn’t have much real value. He probably doesn’t realize that it isn’t likely to work even if he does it.
Normally, giving real estate held more than a year to a charity is deductible at fair market value without regard to whether it is actually used by the charity. But since he is not planning to subdivide his property and give you a deed to the land underneath the building, giving you the right to remove a bunch of boards from his backyard is more likely to be considered a gift of personal property that gets an appreciated fair market value deduction only if used in the charity’s program. If he values it at more than $5000, he will have to pay for an independent appraisal to report on a Form 8283 to be filed with his tax return. (See Ready Reference Page: “IRS Requires Substantiation of Contributions”) If you give it immediately to the neighbor, you will have to file a form 8282 on its disposition, and the IRS is likely to consider that it has no value and deny a deduction entirely (even if it is considered real estate). If he values it at less than $5000, you won’t have to file the 8282, but he is still asking for questions from the IRS that could spread to his entire tax return. And you are being asked to participate in what appears to be a sham transaction.
If the boards have some real value, your directors would likely violate their fiduciary duty by giving them away for free. Even if you could sell them for a small sum, I doubt that the risks involved in moving them (and being sued when they fall down after the resurrection) would be worth your effort. And if they are saleable, your prospective donor would be better off by selling them and pocketing whatever he gets beyond his tax bite.
This sounds like one to decline as graciously as possible. If you had a written gift acceptance policy your work could be a lot easier. (See our recorded webinar: “Gift Acceptance Policies That Work”)
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