Tax Strategies & Credits

Time-Share Use as a Charitable Contribution

by
Delia Mena
on
4/13/2016
Time-Share Use as a Charitable Contribution

Purchasing a time-share is a decision that many people have made. Some are perpetually happy with the decision and some later regret it. In many cases, people who own time shares elect not to use their allocated time, and instead make donations of their share of a property to a charity to be included in a fund-raising auction. If you are an owner of a time share property and you are contemplating doing this, it is important for you to understand that as generous as your gesture may be, doing so generally cannot be deducted as a charitable contribution on your tax return.

IRS guidance

The IRS has indicated via their rule Rev Rul 70-477, I.R.B., 1970-3, that giving somebody either the use of a property or permission to occupy is not the same as making a gift of that property. According to the Internal Revenue Code, the only circumstances under which the gift of a partial interest in a property that you own can be interpreted as a charitable gift, and be deducted, is if the interest is provided within the confines of a trust. This is spelled out under IRC Sec 170(f) (3) (A).  This means that owners of a time-share property are not able to deduct any time that they provide to an auction as a charitable gift.

There are a number of expenses involved in owning a time-share, including the owner’s pro-rata share of the property’s housekeeping services and annual maintenance fee. The IRS regulations also address these fees, saying that they are also not able to be deducted for a week that is donated. Under IRS Reg 1.170A-1 (g), deductions are only allowable for those expenses provided as a service directly to the charitable organization. This means that even though the taxpayer is paying the fees for a week that is being provided to the qualified charity, the fact that the cleaning or maintenance service is not being provided directly to the charity renders it a separate category, and not eligible for a charitable deduction. The same holds true for any other professional service fees that the time-share owner pays for the property being donated for the week.

The only expenses that a time-share property owner is permitted to deduct when they donate their share of time in the property is any costs that they incur directly in conjunction with providing use of the unit. This type of expense is extremely narrow and limited, and an example would include driving the winning bidder to the property. The reason that the costs associated with this action would be deductible is because the service is being provided directly to the charity. These expenses would be extremely minimal, as they would likely be limited to the allowable mileage deduction of 14 cents per mile or a similar type of direct service.

Making a gift to a charity auction is a generous act, but if you think that you are going to be able to take a tax deduction for doing so, you need to find a better way.

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Delia Mena

Delia Mena

Delia Mena, CPA is a Tampa based tax professional who specializes in accounting and tax preparation. Delia is the founder of her own tax based practice, Delia's Accounting Service, based in Tampa, FL. With over 12 years of experience, Delia's practice is fully equipped to assist clients with any of their financial needs. Delia's Accounting Service provides the perfect mix of independent paralegal's, bookkeepers, and notary public professionals providing high quality services to a wide range of clients. To learn more about Delia and her practice, visit her website.

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