All Things Tax

All Things Tax

Like the title says, from the filing process and tax questions to tax policy and reform, you can search and share All Things Tax here. This is the place to find answers to all your general questions that don't fall under the other categories. And just a reminder: questions about software or online filing should be posted in DIY Products.

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Pioneer
Posts: 1
Registered: ‎10-06-2017

Buying a house from a school

We recently purchased a house from a local school's building trades class.  The sale was conducted through a bidding process with the opening bid set at $200,000.  We paid about $20,000 over the opening bid.

 

My question, is the difference we paid above the opening bid ($20,000) classified as a charitable contribution?  This is what I found on the IRS website about it and it seems to fall into that category quite well.

 

"Donors who purchase items at a charity auction may claim a charitable contribution deduction for the excess of the purchase price paid for an item over its fair market value.  The donor must be able to show, however, that he or she knew that the value of the item was less than the amount paid.  For example, a charity may publish a catalog, given to each person who attends an auction, providing a good faith estimate of items that will be available for bidding.  Assuming the donor has no reason to doubt the accuracy of the published estimate, if he or she pays more than the published value, the difference between the amount paid and the published value may constitute a charitable contribution deduction.

 

link to IRS guide

 

Thanks in advance

 

Highlighted
Tax Pro
Posts: 5,615
Registered: ‎02-23-2016

Re: Buying a house from a school

Hi dietz,

 

 

Welcome to the H&R Block community.

 

You are correct.  You have a great deduction here for the amount in excess of the fair market value of the property you purchased, provided of course that the auction was for charity and the organization was a qualifying organization (which most schools normally are).  Note though that the total of all of your charitable contributions for the year cannot exceed 50% of your adjusted gross income and may be further limited if your AGI exceeds $259,400.

 

If you have any other questions I'll be glad to help.

 

Louis,

Senior Tax Advisor (Tampa, FL)