Why would a landlord lease space at no cost to a church for a tax write-off?

I had a call from a church who is willing to occupy the worse space at the shopping center. The thing is they do not want to pay, they claimed the landlord could get a tax write-off. Honestly, it is space that is not going to move anytime soon, or at all, LOL. So a write off sounds better than zero, right? So if they can actually bring shoppers into the center and even have members who are willing to reduce the landlords burden by helping out with cleanup, would this deal make sense for the landlord? I suggested that it be a month to month lease, so when the market improves we can get a paying tenant. I understand that everyones tax situation is different, but I would appreciate any comments. Please do not mention specific groups negatively as loopnet will remove comments that have a negative message about a specific group.
In Leasing Property - Asked by Juan G. - Mar 9, 2009
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Answer(s)

Robert M.
Broker/Agent
Tyler, TX

Of course, the owner should consult his tax professional to verify my opinion, but in my experience it works like this: If there is a basis to establish a value of the rental income (such as the other tenants in the center) then if the owner donates the space, this is an in-kind donation valued at the lost rental income, and the owner should be able to write off a charitable donation equal to the rent amount he could be, but is not, receiving. Thus, assuming he is otherwise cash-flow positive, he could see a benefit equal in value to the top marginal rate he is paying before the donation is made, usually 35%. Clear?

Mar 9, 2009
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Juan G.
Broker/Agent
Ontario, CA

Thanks Robert, now I see the financial benefit. Does anyone here have any experiences to watch out for (making sure they are a legit 501c3, etc), or things to definately include in the lease (relocation clause, etc).

Mar 10, 2009
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David J.
Tenant
Houston, TX

All I can say is, this seams to be a good business move! I am a pastor looking for any space and of course if they are willing to lease a space for a tax write off, I am all for it. My number is 281-704-8740 pastor David Johnson

Nov 25, 2011
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N. B.
Property/Asset Manager
Saint Paul, MN

You cannot donate rental space since there is nothing donated (interest in the property is retained by the owner). In essence you would either have to collect rent or make a journal entry for the income and then donate but this is pointless since you are in no better position financially. The IRS prohibits this type of donation in publication 526. See partial interest in property section.
Please note for GAAP purposes it would be recorded as a donation but not for IRS tax purposes.

Nov 12, 2013
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