Discussion:Rent as a church contribution?
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Discussion Forum Index --> Tax Questions --> Rent as a church contribution?
Actionbsns (talk|edits) said: | 29 May 2008 |
| I'm pretty sure I know the answer to this, but I'm looking for validation. My client has a good sized home here in Kona and they are looking to rent it out since it's not selling. The minister of their church and his family are currently living in a small condo and would love to rent the house. The church can only afford to pay $1800 per month for their rent. They talked to a property manager who indicated the home would rent for about $2200 on the open market. They want to know if the difference between the FMV and the rent paid by the church could be considered as a contribution to the church. | |
| 29 May 2008 | |
| It would NOT be a tax-deductible contribution for your client. | |
| 29 May 2008 | |
| Some might consider it a contribution (who cares whether something is "considered" a contribution), but NO, it won't be deductible. But since the additional $400 per month won't be taxable income to them (unless the minister is a family member) it gets them to the same point. Actually, they come out better, since excluding the $400 from income reduces AGI whereas receiving full rent and paying $400 to church as a contribution increases AGI. | |
TheTinCook (talk|edits) said: | 29 May 2008 |
| It would only make sense to pick up the extra 400 in order to donate it if you had suspended PAL losses. | |
| 29 May 2008 | |
| Excellent point, Tin. It may be that they want to donate $400/mo to the church in order to allow the pastor to rent it at full FMV of $2200/mo. | |
Actionbsns (talk|edits) said: | 29 May 2008 |
| Thanks guys, I like your explanations better than simply NO. No offense CPAdavid, but I'm always telling this client he can't do something. Having a better discussion point will help.
Now, same client has a question about Cobra payments being deductible to the S Corp as shareholder health insurance. I'm thinking no on that one, too, since it's connected to his wife's previous employment. They'll need to take it on the Schedule A. Is there no end to TP creativity? | |
| 30 May 2008 | |
| I don't see a problem in considering it health insurance for a 2% shareholder as long as the corporation pays it or reimburses the shareholder or wife for the premiums. | |
Actionbsns (talk|edits) said: | 30 May 2008 |
| Marcilio, what about the issue of Cobra only being there because the wife had group insurance with her previous employer? Or is it a non issue? | |
| 30 May 2008 | |
| No offense taken Actionbsns. I was on my way out the door and out of town for the Memorial Day weekend and saw your question with no responses, and all I had time for was a quick "NO". Usually the first answer to a question, especially if too short and sweet, will draw a flurry of feedback, which is exactly what happened, and you got some really excellent answers and analysis.
What still hasn't been mentioned explicitly is why the "in-kind" rent is not tax-deductible. That's because it is a gift of a partial interest in the property [Sec 170 f(3)(A)], which is generally not deductible. But it sounds like you already knew that. | |
| 30 May 2008 | |
| The Cobra generally isn't a problem with SE health because it is not subsidized. whether the fact that the entity is an S-corp...I'm not sure if that negates the issue because the insurance is in the name of the shareholder and not the corp. | |
| 31 May 2008 | |
| I'd need to look up the source, but I believe Joanmcq is correct, for just that reason that the insurance is no longer subsidized. I believe that the fact that the insurance is in the individual's name is not a problem if it is part of an accountable plan. | |
