Question

On January 1, 2018 the NYU Cancer Institute has received a promise of a DONATION from the Clinton Foundation for a building that the Clinton Foundation recently appraised at $20,000,000. However, the building cost only $1,250,000. The NYU Cancer Institute promised to keep the building “permanently restricted,” i.e., never to sell it and to use it only for its work in helping cancer patients. As of the end of the NYU Cancer Institute’s fiscal year (December 31, 2017), no title to the building was received by the Cancer Institute from the Clinton Foundation. The NYU Cancer Foundation contacts you for guidance on how to treat this transaction. Required: Prepare a memo pertaining to the donated property and include in your response the guidelines you consulted in preparing your response: a. How should the NYU Cancer Institute record this transaction? b. What value should the Building be recorded at? c. Is there a tax consequence for the Not-for-Profit entities…for either the Donor or the Donee?

Answer 1

Based on the facts of the case, the following shall be considered:

1.NYC Cancer Institute and Clinton Foundation both or not for profit organization.

2. Donation by one NPO should be under the cover of resolution passed by Donor trustee

3. In case of monetary transaction, actual value of money need to accounted

4. In case of non-monetary consideration, (Ex., stock, property) should be recorded at Cost in the book of donor

Based on the above fact, the answer to the queries are:

1. Since NYC cancer institute has not received the clear and permanent tittle of property from Clinton foundation, the same can't be considered in Properties and Asset there by recognition is not required. However a foot note can be added as Contingent Asset in the books of NYC showing the particulars of asset and value of same.

2. If at all property been capitalized, $12,50,000 as cost. however tittle deed has been not executed, it can't be recognized as asset. Assuming that NYC has incurred out of its own to the tune of $ 1.25 million can be capitalized.

3. As far as tax consequence as concerned, In the books of Clinton, transfer of property will be considered as Donation in Kind and the same can be considered for tax deduction. However in the books of NYC, the same in excess of $1.25 million will be considered as unapplied receipt and charge to P&L Account