Personal residence as charitable contribution.

• Author: Stark, Don F.
• Position: Brief Article

Sec. 170(f)(3) allows a charitable deduction for a gift of a remainder interest in real property if the remainder interest is in a personal residence or a farm. The regulations describe a personal residence as any property used by a donor as his personal residence, even though it is not the principal residence; a second or vacation home would qualify.

Making this charitable contribution involves making an irrevocable transfer of a personal residence to a qualified charity, with the donor retaining lifetime enjoyment of the property. The donor may continue to reside in the house for life, while maintaining it and paying the required property taxes; the qualified charity will receive the house on the donor's death. In this way, the taxpayer will realize current income tax benefits as well as estate tax savings.

The regulations provide the necessary tables, formulas and rules for computing the value of the house's remainder interest. The retained life interest may be for one or two lives (e.g., until the death of the second to die of the husband and wife)...