The most likely problem is that a donor must reduce the amount of their deduction by the amount of the personal benefit they received as a result of the donation. That the benefit is bestowed by a third party doesn’t change the result. Here, the donor is receiving a very real and substantial personal benefit (release from their personal indebtedness). So after the reduction, their donation amount is $0.
I’m not a lawyer but this sounds… questionably legal.
The most likely problem is that a donor must reduce the amount of their deduction by the amount of the personal benefit they received as a result of the donation. That the benefit is bestowed by a third party doesn’t change the result. Here, the donor is receiving a very real and substantial personal benefit (release from their personal indebtedness). So after the reduction, their donation amount is $0.
Why would this be illegal?