Investor · Star, ID · Member since 2012 · 4 posts · 0 votes
I am a landlord with a few rental properties and recently acquired a church with an attached house (rectory) which is on the national register. I have rented the rectory out to help pay the significant expenses of remodelling/utilities/etc. I had planned to put the building into a non-profit because we intend to use it for retreats and community space and would like to avoid the realestate taxes as well as accept donations and grants for the restoration of the church. However, I am afraid of putting the church into a nonprofit for fear of loosing the building if the nonprofit dissolves. I am not concerned with the ability to sell the building - we intend to keep it forever or give it back to the episcopal church eventually. I am thinking perhaps what we want is a family foundation? Any idea on best way to do this are welcome. We have contacted a couple accountants but this seems to be a specialization most don't have.
Attorney · Slidell, LA · Member since 2016 · 322 posts · 179 votes
5y
Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.
Putting a building in a nonprofit would remove it from your personal assets. If the nonprofit were to dissolve, the building would go with it. However, when a nonprofit dissolves the assets must go to another nonprofit, or be sold for FMV. So if the ultimate goal is to give it to the church anyway, that might not be a problem. If the goal is to keep it for yourself, you may want to avoid putting it in a nonprofit. Another option may be to rent the building directly to the church NNN and they can talk with the assessor about getting a tax break.
Investor · Star, ID · Member since 2012 · 4 posts · 0 votes
5y
Thanks so much for your thoughts on this Sean. I like your idea about renting it to the nonprofit - it's worth a conversation to see if they would give a tax break. I'm not sure what the likihood of that is. The other disadvantage to putting it into a nonprofit is that I won't get to count all my expenses as rental income deductions, which are significant while we are remodelling.
Attorney · Slidell, LA · Member since 2016 · 322 posts · 179 votes
5y
It may be worth talking to a CPA about your expenses. Typically, remodeling expenses are not deductible until the property is actually in the business of renting. Instead, they are part of the cost-basis.
Investor · Star, ID · Member since 2012 · 4 posts · 0 votes
5y
We are renting the attached vicarage/rectory out as we remodel the rest of the building. I assume the IRS doesn't descriminate re: what part of the building is being repaired...?