Real Estate for Charities brings nationally recognized
expertise to the field of charitable real estate gifts from $100,000 and more. Real Estate for Charities is uniquely
qualified to answer questions.
What are the advantages of donating real
estate, rather than selling it?
The concept of donating versus selling, is most easily explained with an example:
A 69 year old widow owns an office building. She would like to maximize the benefits of
the asset for her children, and support her favorite charity, if possible. The table below
summarizes her options. After careful consideration, she found the greatest benefit to her
children and the charity was to donate the building.
Real Property Liquidation
Sale
& subsequent death
Hold
& subsequent death
Donation
Value
Appraised
value $10mil; (example assumes full sale price)
$10
mil
Donor
gets credit for full amount of appraised value ($10mil).
Seller’s
Current Basis
$500k
$500k
N/A
Sales Cost
$500k
N/A
Donor avoids any sales cost, recapture, capital gains taxes, and a portion
of his ordinary income tax and eventually estate taxes.
Recapture on
Sale
$3mil
(tax $900k 30%)
N/A
Capital
Gains Tax (25%)
$1.5mil
N/A
Net from
Sale
$7.1mil
N/A
Annual
income payment will be arranged at $700k for the rest of donor’s life (subject to
income tax).
Federal
Estate Tax on Net From Sale
$3.9
mil due at death
$5.5
mil
N/A
State
Inheritance Tax (7%)
$500k
$700k
N/A
Heirs
receive…
$2.7
mil after tax
$3.8**
Upon
death of donor, heirs receive $6mil, tax free from life insurance trust fund.*
Additional notes: In the "Sale" scenario, to
generate an income of $700k/year (as in Donation scenario) on the proceeds after selling
the property, donor would have to invest long term safely at 11% rate of return.*- Due nine months from death in cash
**- Less sales cost and discount for cash
Why shouldn't the trust officer at my bank
handle a real estate donation?
Banks outsource real estate to designated brokers who may
not be totally qualified to handle a particular type of real estate. Furthermore, the
designated broker may not be an expert in the area where a piece of real estate is
located. In addition, most real estate professionals are not up-to-date on laws and
regulations governing charitable contributions.
The experts at Real Estate for Charities recognize these inherent pitfalls for trust
officers. They are dedicated, full-time, to supporting advisors, donors and charities,
alike with a network of professionals that have access to updated issues as they relate to
donated real estate.
Why shouldn’t my estate planning
attorney handle a real estate donation?
Attorneys are experts at the law. Just as the bank trust departments outsource their
real estate services, estate planning professionals must rely on outside professionals to
complete these real estate transactions. Donors should suggest that Real Estate for
Charities be brought in as a service provider in the real estate process.
It is Real Estate for Charities’ responsibility to manage real estate state
transactions so that maximum benefits for both the donor and charity can be achieved. This
can be accomplished at no additional cost to the donor. A full-time commitment to real
estate as it relates to charitable giving provides Real Estate for Charities with the
knowledge to structure unique, creative, even unusual transactions that maximize benefits
to all parties.
Why shouldn’t our usual real estate contact handle a
charitable donation?
Most commercial real estate agents have no special training in the intricacies of
transactions associated with charitable donations.Planned giving professionals rarely have real estate expertise.
Clearly, special qualifications are needed.
How often are the tax laws and regulations that affect
charitable donations changed?
The Internal Revenue Tax Codes are updated on an on-going basis. Real Estate for
Charities is constantly monitoring IRS changes to capital gains taxes, ordinary income
taxes, gift taxes and inheritance taxes so they can provide you, or your company with the
most up-to-date advice.
How can donors find worthy charities?
The team at Real Estate for Charities has spent years building relationships and a
knowledge of numerous charitable organizations. Utilizing their extensive network, they
can assist you in identifying a charity that supports causes that are important to you
and/or your company.
What types of properties are typically donated by the
corporate sector?
Donating nonproductive assets to charity can result in significant tax advantages as
well as philanthropic benefits. The knowledge base at Real Estate for Charities will help
maximize the tax benefits of such donations and design sophisticated structures that meet
a variety of corporate goals.
Give me some examples of how Real Estate
for Charities can help a corporation reach financial and philanthropic goals?
Model 1 -- Employee Benefits
Donor: Donates nonproductive real estate assets into Charitable Remainder Trusts, which
fund corporate personnel packages for executive incentives, severance or retirement.Charity: Receives corpus of the trust at termination date of trust.
Donor Benefits: Timely property disposal. Tax benefits. Philanthropic funding and
alternative funding of employee benefit programs.
Model 2 -- Bargain Sale
Donor: Sells property through Real Estate for Charities, a portion of the sale price is
returned to the donor and the balance is gifted to one or more charities.Charity: Receives the partial contribution and either uses or liquidates it.
Donor Benefits: Property disposal with lower capital gains tax. Tax credit for
charitable contribution. Enjoys charitable goodwill while fulfilling philanthropic
commitments.
Model 3 -- Vacant Land
Donor: Sells excess land, originally purchased for a building program, through Real
Estate for Charities. Land has greatly appreciated but lays idle. Donation made to
favorite, qualified charity as land-lease or gift.Charity: Either receives right to use (e.g. recreational facility) or revenues from
sale.
Donor Benefits: When sold, the current appreciated value of land provides large tax
benefits. When leased, the donor receives tax credit for donation and expenses of the
lease payment. Enjoys goodwill and creates positive corporate visibility in community.
Model 4 -- Donor Advised Fund
Donor: Facilitated by Real Estate for Charities, donor transfers property in which
donor retains partial control of the charity’s donated distribution.Charity: Receives an ongoing income stream from fund.
Donor Benefits: Retain control and protects asset. Receives tax credits. Enjoys
positive community relations and good will.
