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BUSINESS & INDUSTRY • * *
V
Donating real estate to charities has benefits
Charitable contributions
typically take many forms:
Cash, check, used clothing,
cars and even stocks and
bonds.
But it’s also possible to
donate real estate to charity
— subject to certain condi¬
tions.
Real estate is a huge
untapped source of contribu¬
tions that can generate tax
and other benefits for the
donor.
Not all charities accept
contributions of real estate.
Many don’t want to be land¬
lords or aren’t set up to han¬
dle real estate transactions.
Those that will take real
estate donations prefer to
avoid properties subject to
mortgages or with known
environmental problems.
To preserve your tax
deduction, the charity must
either use the property for its
designated exempt purpose
or sell it and use the pro¬
ceeds to carry out its mis¬
sion.
Tax-deductible
The biggest advantage of
donating real estate to charity
is the tax deduction.
u The real estate [in ques
tion] has probably appreciat
ed in value; if you donate it
to charity, you can deduct the
fair market value and you
don’t have to pay any capital
gains taxes,” said Tom
Ochsenschlager, vice presi
dent of taxation for the
American Institute of CPAs.
But, he cautions, there are
limits on the amount of con
tributions you can deduct.
■ The general rule is you
can deduct contributions up
to 50 percent of your adjust
ed gross income. If your AGI
is $200,000, your contribu
tion limit would be
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MARKET IN BRIEF At the close of Aug. 15,2008 John M. Weaver
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DOW S&P 500 NASDAQ 210 Dahlonega St., Wachovia
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Information has been obtained from sources believed to be
reliable, but its accuracy and completeness are not guaranteed.
$100,000,” Ochsenschlager
said.
Any contributions you
can’t deduct in the current
year can be carried forward
for up to five years.
Ochsenschlager cites the
example of someone who
donates land for use as a city
park.
“If you bought the land
for $50,000 and it’s now
worth $1 million, you’re eli
gible for a $1 million deduc
tion. However, if your AGI is
$200,000, you’ll only be able
to use up $500,000 of the
deduction over five years,
There are, he says, several
ways to work around that
problem: “You can give the
charity a partial interest in the
property and spread out the
donation. But that’s tricky to
do with real property.”
The real estate fin question] has probably
appreciated in value; if you donate it to
value charity, you can deduct the fair market
and you don't have to pay any capital
gains taxes.
— Tom Ochsenschlager, vice president of taxation for the
American Institute of CPAs 99
The more common solu¬
tion, Ochsenschlager said, is
a bargain sale. “In the earli¬
er example, the person
donating the park land
might agree to sell the land
to the city for $500,000 and
take a $500,000 charitable
contribution — the amount
they can deduct over five
years. •>)
Ochsenschlager’s exam¬
ple highlights the impor-
tance of careful planning
when giving real estate to
charity, in order to maximize
the benefits to you and to the
charity. He says it’s also
very important to get an
independent appraisal of the
donated property’s fair mar¬
ket value from a competent
appraiser. “If the appraisal is
significantly off, the tax
penalty is enormous — up to
40 percent of the deduction. n
FORSYTH COUNTY NEWS - Sunday, Augu.t 17.2008
Contribution alternatives
You can donate virtually
any type of real estate to
charity. Good candidates
include second homes, inher
ited property, vacant land or
rental property,
Ochsenschlager says he once
represented a client who
donated property with scenic
coastal views to a nature con
servancy to prevent future
development of the land,
Typically, as property owners
get older, many no longer
wish to pay taxes on proper¬
ties they once used for recre¬
ation or to generate income.
Real estate contributions
can be structured in a number
of different ways:
Outright gift — You trans
fer the property directly to
the charity, which then usual
ly sells it and uses the pro-
PAGE 7A
ceeds for charitable purposes.
Bequest by will at death
— Your estate gets a charita¬
ble deduction for the proper¬
ty’s fair market value, and
your family won’t have t6
deal with the upkeep and sale
of the property. *
Charitable remainder trust
— This option lets you make
an irrevocable gift today
while receiving substantial
tax benefits and an income
stream for your lifetime (or
the life of you and .your
spouse). When the donor
dies, the trust assets go to the
charity.
Life estate — You can
donate property to charity
and retain a life estate,
which gives you the right to
continue to occupy the prop¬
erty until your death. You
also get a current tax deducr
tion based on IRS tables’,
This strategy is helpful if the
property is a residence you
want to continue living in
until you die.
According to Ochsen
schlager, the tax-exempt
organization that receives the
property must sign a form
acknowledging that they have
received it and that they are
using it for their exempt pur
pose. The form needs to be
attached to your tax return,
The IRS is very particu
lar about the formalities
being observed, so consult
your tax advisor to make sure
you don’t jeopardize your
deduction,” he said,
Provided by John M.
Weaver, senior financial
advisor, and PIM portfolio
manager with Wachovia
Securities Financial
Network, located at 210
Dahlonega St., Suite 103-A,
Cumming, GA. For more
.information, call John
Weaver at (678) 455-0016.