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[Stan]

The point being argued is mostly moot.  A former 3ABN board member has said that the board did this deal with the house to provide a retirement benefit for the Sheltons. But didn't I read some where in a court case involving the State of Illinois and 3ABN that the Sheltons claimed they got no housing or retirement benefits from 3ABN?

SDAminister

I had also wondered that about the retirement at one time, but not sure that was the case now. 

Regarding not getting housing/retirement benefits provided by 3ABN I thought you had said this property was donated by a lady, with the remainder going to 3ABN after the life tenancy was done?

[SDAminister]

The point being argued is mostly moot.  A former 3ABN board member has said that the board did this deal with the house to provide a retirement benefit for the Sheltons. But didn't I read some where in a court case involving the State of Illinois and 3ABN that the Sheltons claimed they got no housing or retirement benefits from 3ABN?

SDAminister

I had also wondered that about the retirement at one time, but not sure that was the case now. 

Regarding not getting housing/retirement benefits provided by 3ABN I thought you had said this property was donated by a lady, with the remainder going to 3ABN after the life tenancy was done?

If a lady had donated the house directly to the Sheltons, that would be one thing. But for 3ABN to be in the middle of it and then to practically gift boards members something worth over $130K would seem to be a bit out of order.

[Bob Pickle]

Are you saying you have never been made aware of May Chung having any interest in the property to convey to 3abn or anyone (for example LS and DS)?  Have you ever discussed the matter with LS as one would think she would know whether she was given a life estate in the property and who gave it to her and DS and when. 

The deed says the life estate was given by 3ABN to May, Danny, and Linda.

What if the donor never actually owned the property?

??

How could they donate something they never owned??

That's my point. My understanding, which could be wrong, is that May never owned the property.

The residual value of a home to the person who have life tenancy is simply not the current market value.

It would appear from http://www.irs.gov/charities/charitable/article/0,,id=123303,00.html that FMV must be used:

Intermediate Sanctions - Excess Benefit Transactions
 
An excess benefit transaction is a transaction in which an economic benefit is provided by an applicable tax-exempt organization, directly or indirectly, to or for the use of a disqualified person, and the value of the economic benefit provided by the organization exceeds the value of the consideration received by the organization.

To determine if an excess benefit transaction occurred, include all consideration and benefits exchanged between or among the disqualified person and the applicable tax-exempt organization and all entities it controls.

In addition, if a supporting organization makes a grant, loan, payment of compensation, or similar payment to a substantial contributor of the organization, the arrangement is an excess benefit transaction. The entire amount of the payment is taxable as an excess benefit.

In an excess benefit transaction, the general rule for the valuation of property, including the right to use property, is fair market value. Fair market value is the price at which property, or the right to use property, would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy, sell, or transfer property or the right to use property, and both having reasonable knowledge of all relevant facts.

An excess benefit can occur in an exchange of compensation and other compensatory benefits in return for the services of a disqualified person, or in an exchange of property between a disqualified person and the applicable tax-exempt organization.

Based on the above, it appears that the question is whether Danny paid FMV for the property in question. It is clear that he did not.

Another vital question is whether Danny paid 3ABN full price for the life estate 3ABN gave him. Did he? If not, then that would appear to also be a section 4958 excess benefit transaction.

[Stan]

Two questions...

If May never owned it how could she give it? Then how is her name even involved?

AND

How could  Danny pay 3ABN full price for the life estate 3ABN gave him?  If he paid for it then it was not given to him.

[Stan]

Bob I can not find anything about life tenancy in what you posted..

The residual value of a home to the person who have life tenancy is simply not the current market value.

It would appear from http://www.irs.gov/charities/charitable/article/0,,id=123303,00.html that FMV must be used:

The residual value of a home to the person who have life tenancy is simply not the current market value.

It would appear from http://www.irs.gov/charities/charitable/article/0,,id=123303,00.html that FMV must be used:

[childoftheking]

The other quote says including the right to use property.

In an excess benefit transaction, the general rule for the valuation of property, including the right to use property, is fair market value. Fair market value is the price at which property, or the right to use property, would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy, sell, or transfer property or the right to use property, and both having reasonable knowledge of all relevant facts.

In other words, the value at the time of the gift of the life lease would be the amount that a willing buyer would pay to use the property for that amount of time (to buy a lease or to rent it).

3ABN gave them the right to use the property as long as they would live. There was a dollar value to that gift even if it was not stated at that time.

It would seem that if as Nosir Myzing said May donated it to 3ABN, it would be reasonable that she could request to be given a life lease as a condition of the donation and thus reserve a life lease during her lifetime. But 3ABN gave it to the Sheltons also and we do not know if she required it. But whether or not she requested it, the Sheltons were disqualfied persons.

What did the Sheltons give in return for the value of the life lease? If they did not give fair market value for the life lease. It was an excess benefit transaction. Their position as founders and officers made them subject to rules of law that an ordinary person would not have to obey.

Edited for correction of grammar and for formatting.

[Stan]

I know there are a lot of ways to give.

I  suspect more and more, that she just gave the remainder value of the property to 3ABN.

[Bob Pickle]

Two questions...

If May never owned it how could she give it? Then how is her name even involved?

That's my question exactly.

On August 4, 1988, Charles and Helen Davis sold the property in question to 3ABN, not May Chung. The deed was recorded on Oct. 17, 1988. Transfer tax appears to be $66.00, which gives an idea of the value of the property.

Supposedly, 8 years later, 3ABN gave May, Danny, and Linda a life estate in that property.

So if may never owned it, how could she be given a life estate in it? And, why was it deeded in May, Danny, and Linda's names in Feb. 1998?

Stan, do you know of anyone who has a life estate in a property who also has the deed in their name?

AND

How could  Danny pay 3ABN full price for the life estate 3ABN gave him?  If he paid for it then it was not given to him.

If Danny didn't pay full FMV for things that 3ABN gave him, that's called a section 4958 excess benefit transaction.

[Stan]

I have very limited experience, jut what I am going through, the one i mentioned earlier.

Did May buy it from 3ABN, have it in the name of all three, with the residual to go back to 3ABN?

[Bob Pickle]

I have no record of May ever buying the property from 3ABN. I believe the mortgage that was released on August 1, 1991, was released in the name of  3ABN, Danny, and Linda. The next deed concerning the property appears to be in Feb. 1998.

[Stan]

What do you think it would have cost to buy out Danny's Life Tenancy?  If they would have done it that way?

[childoftheking]

What do you think it would have cost to buy out Danny's Life Tenancy?  If they would have done it that way?

What difference would it make since you are only saying "If they would have done it that way?"

[GRAT]

Stan - Maybe I am totally missing something but in your example who gets the difference between the 1 million minus the $100,000?   

[Stan]

It is the current estimated value of a future gift, which more than likely not transfer to the Conference for 50 or so years.

Those figures are not exact, and details still need to be worked out.

In Canada we issue the Charitable Receipt to the estate, based on actuarial life expectancy studies.

We would offer to sell the person the residual value of the gift for the same amount we issue the receipt for.  (plus transfer taxes etc)

Inflationary prices of home are not taken into consideration.

IF we are able to liquidate the residual value, I can already here 'the saints' ranting on and on that we gave away a 1,000,000 home for 100,000..

Does that make sense GRAT?

[Stan]

Stan - Maybe I am totally missing something but in your example who gets the difference between the 1 million minus the $100,000?   

MAYBE a better answer would have been, that is the est value of living there for the est lifetime of that one who was gifted with life tenancy.