[Beth Grierson]

I'm having a disagreement with one of my colleagues over whether or not a donor can get a tax-deduction for donating a stay at an income-generating vacation property. (say, I own a villa in Tuscany that I normally rent out, but donate a week stay to our organization's live auction)

Now, I think this:

Quote:

Partial Interest in Property

Generally, you cannot deduct a charitable contribution of less than your entire interest in property.
Right to use property. A contribution of the right to use property is a contribution of less than your entire interest in that property and is not deductible.
…
Example 2.
Mandy White owns a vacation home at the beach that she sometimes rents to others. For a fund-raising auction at her church, she donated the right to use the vacation home for 1 week. At the auction, the church received and accepted a bid from Lauren Green equal to the fair rental value of the home for 1 week. Mandy cannot claim a deduction because of the partial interest rule. Lauren cannot claim a deduction either, because she received a benefit equal to the amount of her payment. See Contributions From Which You Benefit, earlier.

(see page 8 - http://www.irs.gov/pub/irs-pdf/p526.pdf)

is a clear indication that you cannot get a deduction for that donation, regardless of whether or not you normally charge rent.

The counter argument is that the example listed refers to personal property, not something that normally generates income, and that later on, the same document indicates that you can get a deduction for donating "inventory" from your business (page 10) or other "ordinary income property" - that is property that if sold would generate income for you. According to this argument, since that week at my Tuscan Villa would have generated income had I rented it, it should count as inventory or "ordinary income property"

I don't want to p.o. our donors, or make it harder for our team to solicit donations to our auctions (and travel packages always do well for us), but I also don't want people to think they're getting a deduction when they can't.

Thoughts?

[Melissa Siobhan]

While that is one example there are tons of other times where partial interest applies and this includes any facility "donating" their space to use for an event that they normally rent. Unfortuantely IRS pub 526 is limited in the examples they gave to show that.

To be honest - their tax deductibility is not your concern. All you should probably do is send them a thank you letter describing what they did.

I do not believe that any of your receipts need to even say your gift is tax-deductible (it is not mentioned anywhere in IRS Pub 1771) they just need to say whether or not any benefits were received. If they choose to try to use your thank you letter as a receipt then it is up between them and their tax advisor when they get audited.

These types of questions have been asked and answered on the listserv at Fundsvcs.org -. Check the archives they may have better places to send you for backup.

[Melissa Siobhan]

Oh and regards to "inventory" I belive that is only with regards to the sale of personal property like furniture or other tangible property.

Unless you are handing over the deed to the vacation property and letting them keep it, I do not believe it is a gift-in-kind.

[Beth Grierson]

Thanks for the link - I'll check it out.

fwiw, I'm not worried about how this affects donor acknowledgment (our letters only describe the item donated, we don't, per 1771, mention value and we don't mention deductibility).

The question came up around how we SOLICIT such donations, and the desire of some to promote rental donations as tax-deductible.