Tax aspects of contributing a house to a fire department.

• Author: Leibtag, Bernard

Local fire departments often deliberately burn existing structures as a training exercise. New fire fighters can practice their skills and techniques, knowing in advance that the structure is uninhabited. Often individuals will donate an old property, possibly even a former residence, to the local fire department. Obviously, where possible, taxpayers would like to take a charitable contribution deduction for their donation.

The first and most important point to note is that there is a significant difference between donating the house itself to the fire department and giving the fire department the right to use the house for training purposes. In the latter case, Sec. 170(f)(3)(A) specifically states that "a contribution by a taxpayer of the right to use property shall be treated as a contribution of less than the taxpayer's entire interest in such property." As a result, no charitable contribution is allowed. (See also Regs. Sec. 1.170A-7(a)(1).)

To get a charitable contribution deduction for the fair market value of the property, the taxpayer must contribute the house itself to the fire department. (This item does not discuss the substantiation and documentation rules required by Sec. 170(f)(11).) In most situations taxpayers want to contribute only the property and not the underlying land. They are also concerned about deeding the property to the fire department and the related costs of doing so.

The regulations and IRS Pub. 526, Charitable Contributions, contain no requirement for an actual transfer of a deed. In fact, a Tax Court decision supports this position. Scharf, T.C. Memo. 1973-265, concerned tax years 1968 and 1969, and although it predates Sec. 170(f)(3) (which was added to the Code by...