Rev. Rul. 70-477

A taxpayer was the owner of certain real property that he had heretofore rented for a substantial amount. In 1968 he granted to an organization described in section 170(c)(2) of the Internal Revenue Code of 1954 permission to use and occupy the property rent free. Under the law of the jurisdiction in which the property is located, the allowance of such rent-free use and occupancy of real property is not a legally enforceable conveyance of a present interest in property.

Held, under the facts stated above, the permission to use and occupy property granted to the organization described in section 170(c)(2) of the Code does not represent a payment made to or for the use of the organization within the meaning of the statute. Accordingly, no deduction is allowable under section 170 of the Code for such use and occupancy.

Held further, the fair market value of a conveyance that would be recognized as a legally enforceable conveyance of a present interest in property under the law of the jurisdiction in which the property is located would constitute a charitable contribution under section 170 of the Code prior to its amendment by the Tax Reform Act of 1969, Public Law 91-172, C.B. 1969-3, 10.

In accordance with section 170 of the Code, as amended by the Tax Reform Act of 1969, a contribution, made after July 31, 1969, to a charitable organization of the right to use property is treated as a contribution of less than the entire interest in the property and does not give rise to a deduction.

The conclusions stated herein apply equally to the grant of rent-free use of personal property, as for example the grant by an automobile dealer of the rent-free use of his automobiles to an educational organization for its driver education program.

I.T. 3918, C.B. 1948-2, 33, is superseded since the position stated therein is restated in this Revenue Ruling under the statute and regulations in effect for years prior to amendment by the Tax Reform Act of 1969.

¹ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.