Would it be unethical for a non profit to pay rent then get the money back from a donation from the renter?
We’re a non profit organization and can’t afford rent on an office but since a company can’t get a tax deduction for allowing us to use it rent free could we pay them rent every month and then have them “donate” the same amount back to us? We would be shown as paying rent and they would be shown as giving a monthly donation. Would this be wrong?
Would it not profit the company renting the office to us by them being able to deduct the cash donation they’re making to our non profit org. ?
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July 25th, 2009 at 12:14 pm
Go for it! They should be able to donate their facilities for your use and have the tax write off.
Sounds like a win win situation.
July 28th, 2009 at 6:25 am
Why would your charity “need” to show a rental expense? If you are reimbursed for your rental expense from the owner, you have zero rental expense.
The owner will recognize rental income on the office and then deduct the same amount as a charitable contribution. The owner is not engaged in the rental of this office unit for profit, so the IRS, if they found out about it, would disallow deductions in excess of the rental income received. The owner would have zero tax benefit from this arrangement.
So it would be incorrect for the company to take deductions in excess of the rental income received. They cannot properly benefit from this arrangement.
July 30th, 2009 at 4:19 am
It’s going to end up with a net of zero on both ends. Your non-profit would have a rent expense = to the non-cash contribution of forgiven rent from the company. And the company would have rental income = to the contribution to your non-profit. The only party that would make out would be your organization by getting free rent in essence. The only way that the company would make out is if your non-profit agreed to keep the office clean so that the company might not have to pay a cleaning crew to clean it.