Philanthropy Puzzler: Remainder Interest in a Home or Farm

 

The “Philanthropy Puzzler” features gift questions fundraisers may encounter in the field, followed by solutions from our panel of experts. If you would like to send us your own “puzzler,” please email us at info@SHARPEnet.com with “Philanthropy Puzzler” in the subject line.

Philanthropy Puzzler

Camille read an article in her alma mater’s alumni newsletter about a classmate who deeded a vacation home to the school while retaining the right to use the home for the rest of his life. Not one to be outdone, Camille is now considering this remainder interest gift technique using an apartment building she owns in a nearby town. She has asked your thoughts about her gift idea.

Puzzler Solution

The exception to the partial interest rule for a gift of a remainder interest in a home or farm applies only to an interest in a personal residence [Code §170(f)(3)(B)(i)], defined as any property used by the taxpayer as their personal residence, even though it is not used as a principal residence [Reg. §1.170A-7(b)(3)]. Because Camille does not live in the apartment building, it would not qualify for an income tax or gift tax charitable deduction. She could, instead, use the apartment building to fund a charitable remainder trust from which she could retain a stream of payments for her lifetime. ■

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