Giving Away the House

Giving Away the House

Sometimes, you just don’t need that house anymore. There are at least three ways to dispose of it to clear the land: (1) bulldoze it, and pay the fee to send it to the landfill, (2) donate it to the local fire department to use for practice, or (3) donate it to a charity to deconstruct and reuse the salvaged materials.

The technique of donating a house to the fire department has a long history in tax law, but the majority of the case law activity has been in the last three years. Unfortunately for the donors, the recent outcomes haven’t been favorable.1 For the uninitiated, this is how the donation works: A donor gives her house to the local fire department. After taking the appropriate precautions, the fire department sets the house on fire and then puts it out, giving the firefighters a chance to practice. This practice is especially valuable for volunteer firefighters who otherwise might not have the opportunities or practice venues that larger departments have available.


Tax Pitfalls

As laudable as the transaction may be, there are at least three tax pitfalls that have tripped up donors on their way to a deduction. First, the transfer to the fire department may not be an effective gift of the house itself: The gift document may only convey a gift of the right to use the house. A gift of the use of property isn’t deductible.2  Second, there’s a valuation issue. Since the gift is only the house and not the house with the land, the usual valuation methods for real estate gifts aren’t appropriate.3 One court felt the right appraisal methodology was to value the house as if it were being sold to move off the existing lot to another lot. Unfortunately, this methodology left the donor with no deduction. The court held that the benefit he was deemed to receive by not having to tear down the house was more than the value of the house if he’d sold it separately from the land.4 A third potential pitfall may arise from state property law. In some states, it’s not possible to convey title to the house separately from the underlying land. If that restriction applies, and an attempt is made to donate the house alone, either the donation may be incomplete or ineffective, or the courts may see it as a (non-deductible) donation of the use of the house.5 


Alternative Donation

An alternative is to donate the house to an organization that will disassemble it and salvage as much as possible for re-use, thus avoiding dumping tons of material in the local landfills. There haven’t been any court cases on this yet, nor has the Internal Revenue Service commented publicly. Since there are a number of charities established just for this purpose, especially on the east and west coasts, we may assume that the IRS is aware of the technique. The homeowner hires the deconstruction charity (this fee isn’t deductible). Over a relatively short period of time, usually less than two weeks, the house is deconstructed and hauled away, mostly to other charities that construct or repair homes, or to ones that will recycle any remaining materials (for example, concrete foundation blocks and shingles are ground and recycled as road materials). The donor must obtain a qualified appraisal of the materials being donated.6 Because what’s being donated are the individual components, not a whole house, the appraisals tend to be very long and detailed.  

What these two donation techniques have in common is a need for a qualified appraisal7 of exactly what’s being donated. In addition, if a donor is contemplating donating the house to a fire department, a survey of the case law is probably in order to avoid the potential pitfalls before a donation is made.              


—This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates and related entities, shall not be responsible for any loss sustained by any person who relies on this publication.



1. See Patel v. Commissioner, 138 T.C. No. 23 (T.C. 2012); Rolfs v. Comm’r, 668 F.3d 888 (7th Cir. 2012); and Hendrix v. United States, 2010 U.S. Dist. LEXIS 73999 (S.D. Ohio 2010).

2. Internal Revenue Code Section 170(f)(3).

3. Rolfs, supra note 1. 

4. Rolfs et ux. v. Comm’r, 135 T.C. 471 (T.C. 2010).

5. Patel, supra note 1.

6. Treasury Regulations Section 1.170A-13(c)(2).

7. Ibid., Section 1.170A-13(c)(3).