Could I claim this as a donation?

No. You cannot claim the value of the unreplaced HVAC system or the tenant’s breach of contract as a charitable donation on your tax return. Under IRS rules, a charitable contribution deduction requires a transfer of cash or property to a qualified 501(c)(3) non-profit organization with "donative intent." Forgiving a debt or choosing not to sue a private tenant for damages does not qualify as a gift to a qualified charity. From a tax perspective, this is generally handled in one of two ways: 1. **Capital Improvement:** When you eventually pay to replace the HVAC yourself, you capitalize the cost and recover it through depreciation over its recovery period (typically 27.5 or 39 years). 2. **Loss Deduction:** If the old unit was damaged or abandoned, you may be able to claim a loss for the remaining adjusted basis of the *old* unit under Section 165, but you cannot claim a deduction for the "replacement value" or the income you "lost" because the tenant failed to perform. Consult with your tax advisor to determine the remaining basis of the failed unit for a potential abandonment loss.