"Harlan Lunsford" <hlunsford[at]bellsouth.net> wrote:

- quote -

I am thinking this is the key point. This transaction is
not primarily based on disinterested generosity, but is
something for something. The seller is getting a commission
reduction in exchange for the money going to the charity.

Colin Whipple, CPA

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Harlan Lunsford wrote:

[Realtor wants to reduce his commission by 15% if client
agrees to donate that 15% to charity]

- quote -

Perhaps. But it seems to me that in the situation proposed,
the end result will be pretty much the same either way. If
it's not, though, you're right. You can't turn what should
be normal expenses into a deductible contribution with a
scheme like that.

Stu

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John H. Fisher wrote:
- quote -

John then replied:

- quote -

John, how do you know there will be no taxable income?
They might have other income you know. Are you saying the
deductibility would depend on whether or not sale of house
generated on it's own taxable income?

- quote -

If it walks like a duck, quacks.... etc.

Certainly I'm in agreement with you John, it don't pass the
smell test.

Hmmm. maybe it's a Kahl... eee forni ya thing?

ChEAr$,
Harlan Lunsford, EA n LA

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Stuart Bronstein wrote:
- quote -

Well, it's like this. Years ago when living in Baltimore,
the local Catholic church which of course ran the parochial
school where my daughter attended said in effect: For
those parents who donate at least $xxx per year, there will
be no tuition for the children. Non-believers of course paid
tuition.

The IRS since cracked down on this scheme and there is a
ruling if I remember right.

Isn't that what this is?

ChEAr$,
Harlan Lunsford, EA n LA

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Colin Whipple wrote:

- quote -

Why would it be disallowed?

First of all, it seems to me that it doesn't matter who is
legally making the donation. The financial result will be
the same either way. Well, except that the 15% will be
added to the buyer's basis in one case and immediately
deducted from his current taxes in the other. From the
standpoint of the agent he ends up with the same money and
the same taxable income either way.

- quote -

I've never had occasion to research the effect of a contract
to make a charitable contribution. And in a quick check of
the cases I wasn't able to find a single case in which the
issue was ever raised.

Personally, I don't see why the deduction wouldn't be
allowed, unless it involved some scheme to materially
distort income.

Stu

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- quote -

Collin, it just doesn't smell right!!! In the first place,
the first $250,000 ($500,000) is not subject to tax, if the
owner qualifies. There is no taxable income to generate a
tax deduction. If the gain were to exceed those thresholds,
and it generated taxable income for the taxpayer, the
charitable deduction might qualify but only if it is from
income earned by the taxpayer. (MO without research).

If the agent decides to reduce his/her commission, that's on
them. In order for them to have a deduction, they would
first have to show the commission as income. It doesn't
make much sense to do that 'cause they'd likely have to pay
self-employment + income tax (local, state, etc) costing
them more than the value of any deduction.

It just makes no sense, TO ME, in any other way. Smells
like a scam to me or a well intentioned misgiving!!!

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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Some people in my community are promoting a program where a
real estate agent and the seller of a property agree that
the agent will reduce his commission by 15% and the seller
donate that amount to a local charity. They have produced
brochures with information about real estate agents who have
agreed to this in advance and with the names and addresses
of some of the local charities on them. The brochures use
the phrase "tax deductible donation" in several places and
state that the charity will send the seller "a letter
acknowledging your tax deductible donation at the close of
escrow."

The agreement in the brochures reads in part as follows:

Realtor statement:

"Upon the sale of the home, I agree to reduce the listing
commission by 15%. The 15% reduction will be payable to ABC
Charity at the close of escrow."

Seller statement:

"We agree to make a tax deductible donation in the amount of
the 15% reduction in the Realtor's listing commission to ABC
Charity. Said donation will be paid at the close of escrow
from the Seller's proceeds.

I am the tax advisor for two of the local charities. My
concern is that this looks more like a donation by the real
estate agent than by the seller of the property, and on an
audit the deduction might be disallowed. I want the two
charities to add a disclaimer but the phrase "tax deductible
donation" is used so often in the brochure (which have
already been printed up) that an added statement stuck on
with a label of some kind would look very odd and might be
ineffective.

Has anyone had experience with this? Any rulings or cases?
Any opinions on whether this works?

Colin Whipple, CPA
La Habra, California

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