TAX-DEDUCTIBLE    DONATIONS

Nonprofit organizations accept many different types of donations, from cash to in-kind goods and services. One of the less common donation types is real property, such as land or buildings. Donations of real property can be very useful and provide great benefit to a nonprofit organization. But what happens if your organization shifts its strategy or outgrows its use for the property?

In some cases, real property donations are restricted with stipulations that indicate what pathways can be taken if the nonprofit can no longer utilize the property. However, donations of real property can also be unrestricted – with no stipulations on its future use or disposal. Depending on these restrictions (or lack thereof), one creative option is for your organization to donate the property to another nonprofit. Doing so is often a win-win situation for both organizations. The nonprofit donor frees itself from continued repair and maintenance of the property, while the receiving nonprofit can use the property to further its mission.

Since the passing of real property from one nonprofit to another is not a common occurrence, finding specific accounting guidance on this situation can be tricky. The framework for classifying transfers of assets under ASU 2018-08 applies to both the receiving nonprofit as well as the donating nonprofit, so that guidance is a good starting point for both organizations. Assuming there are no contingencies – and the donating nonprofit does not receive commensurate value – there is no exchange, and the transfer is handled as a nonreciprocal transaction, specifically a contribution.

Recording the recipient’s side of the transaction is relatively simple from here. The real property is added to the nonprofit’s fixed assets (at fair market value) on the date of transfer, and reported as contribution support in the Statement of Activities.

For more information please call   1-800-974-3314