Gifts of Real Estate
For many people, real estate is one of their primary assets. When real property increases significantly in value, the owners may not have anticipated that they may owe capital gains taxes on the amount of the sale that represents the increase in value. Giving part or all of an appreciated property can help to minimize capital gains taxes as well as providing other benefits.
Benefits and Options for making a gift of real property:
- Outright gift of your entire interest: By gifting your entire interest in a property, you can eliminate all capital gains taxes that would normally be due upon a sale and receive a potentially significant charitable deduction.
- Gift of part of you interest: Unlike most charitable gifts that do not allow the gift of a partial interest, tax law allows you to make a gift of part of your interest in real property as long as it is an undivided interest. That means that you are gifting all the rights that come with ownership of the property and not holding back some right (such as mineral rights). In many cases, this technique can be used with highly appreciated property to completely "zero out" capital gains taxes while still receiving significant proceeds from the sale.
- Utilizing real property to fund a charitable remainder trust: This technique allows a donor to place real property inside of a charitable trust prior to a sale. When sold, the charitable trust is the seller and pays no tax. The donor receives a charitable deduction up front and then a lifetime income for themselves and spouse and potentially for a term of years to other family members if they so desire.
How to make a gift of real property:
Making a gift of real property is a significant decision that should be discussed with your professional advisors. It is also important that to be in compliance with certain tax laws, you should begin the process in advance of making an agreement for sale of the real property. Having a binding agreement on a real property can prevent you from being able to utilize some planned giving techniques.
If you have any questions about gifts of real property, please contact us. We would be happy to assist you and answer your questions.
Mortgaged Property - Please contact us if the property you wish to give has existing debt or a mortgage. Indebtedness can affect your charitable tax deduction.
Difficult Property Gifts - Certain properties pose challenges. We have adopted policies to limit the acceptance of certain kinds of real estate. Please check with us before making a gift of real estate so we can explain our gift acceptance policies.
Capital Gains Tax - Check with us on the capital gains tax implications of your gift. You may also be interested in life income options.