Gifts of Real Estate
Introduction
You have the opportunity to generate income, receive tax deductions and make a difference with a gift of real estate to Arizona State University. We consider several forms of appreciated real estate, including residential, commercial and industrial properties, farms and undeveloped land.
The benefits of your real estate donation abound, and our experienced team of experts is here to help you discover the best strategy for your charitable and financial planning.
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How it Works
There are several ways to donate property, depending on your circumstances and goals. The good news is that each of them comes with its own advantages.
You can gift part or all of your real property by executing or signing a deed transferring ownership. Your gift will generally be based on the property’s fair market value, and you can avoid capital gains taxes and remove the asset from your taxable estate.
You may also be able to receive a significant income tax deduction and/or an increase in income when gifting a property. Enjoy financial security immediately and support ASU students, programs and research for years to come.
Types of Real Estate Gifts
Outright gifts
When the time has come to sell an appreciated asset, you can benefit greatly from gifting the property. In addition to freeing yourself of property ownership and avoiding the selling process, you qualify for an income tax charitable deduction equal to the property’s full fair market value and eliminate capital gains tax on its appreciation. In addition, you reduce your taxable estate.
Success story
ASU received a donated vacation home that funded the establishment of the Thelma G. Wolff International Scholarship, which enabled ASU student Cassandra Savel to further her sustainability studies and participate in research on urban transportation infrastructure and social well-being in the Netherlands for a semester.
In your will or trust
A bequest is one of the easiest gifts to make. It also ensures you much flexibility. You may consider this option if you would like to continue to enjoy ownership of your property during your lifetime and reduce your estate-tax liability. Bequests can be easily created or changed at any time.
Success story
In addition to running a successful architectural practice, Mitchell, an ASU design school and architectural studies alumnus, owns and manages a commercial office property in downtown Phoenix. Mitchell has three grown children that he does not want to burden with the long-term management of this property. He has other assets that he plans to leave to his children. Instead, he has bequeathed the office building property to the ASU Foundation through his living trust. At the time of his death, the property will be transferred to the ASU Foundation. The net proceeds from the sale of the property or the net income from leasing the property will be used to fund an endowment at the Herberger Institute for Design and the Arts, as Mitchell directed.
Charitable remainder unitrust
This is an excellent vehicle for gifts of appreciated property and a great way to invest in the future of ASU. Upon transferring your property to a charitable remainder unitrust, we invest the trust to bring you an income stream for life (or a term of up to 20 years) and an immediate income tax charitable deduction. After all trust payments have been made, ASU benefits from what remains thanks to your generosity.
Success story
Susan, 60, is not an ASU graduate but has enjoyed the arts at ASU Gammage for decades. She wants to make a gift to the ASU Foundation to help ASU Gammage. Susan inherited a warehouse building from her parents a decade ago and the maintenance and upkeep of the warehouse has been time intensive and a cost burden. Her real estate broker had been unsuccessful in trying to sell the warehouse for years. She is now planning her retirement strategy and no longer wants to have to manage this warehouse and worry about keeping it leased. Her broker suggests she work with the ASU Foundation to transfer her warehouse into a 6% charitable remainder unitrust with annual lifetime payments to her. The value of the property is $250,000. Subsequent to the sale of the warehouse, Susan begins to receive payments based on the net proceeds of the sale. She is eligible for a federal income tax charitable deduction of $81,305 in the year she creates and funds the trust This deduction saves Susan $22,765 in her 28 percent tax bracket. Now, without the responsibilities of real estate ownership, each time Susan attends an event at ASU Gammage, she takes pride in knowing she had a part in Gammage’s continued legacy.
Bargain sale
If you own a property you’re willing to sell and are seeking a strategy to reduce your income taxes, you have the opportunity to gift your property for a price less than fair market value and enjoy a range of benefits —even if you have a mortgage on your property. Reduce capital gains tax and receive a charitable tax deduction on the gifted portion within five years of making the gift in addition to cash from the sale.
Success story
Karen and Tom own a second home in the cool pines of Flagstaff, Arizona, for which they paid $80,000. It was recently appraised at $250,000. They are planning to retire in the Midwest to be closer to their children and grandchildren and would prefer to recover their original purchase price, but are anxious to sell the property as soon as possible to spend the Christmas holidays with their family. Knowing how swiftly the ASU Foundation can transact the purchase of a home, their real estate broker suggested they sell the property to the ASU Foundation for $80,000 to recoup what they originally paid for the property. Karen and Tom claim a charitable income tax deduction for $170,000, an amount equal to the difference between the fair market value of their house property on the date of their gift and what the ASU Foundation paid for the property.
Frequently asked questions
How will your client’s property benefit ASU?
We work with your client to determine how the proceeds of the gift will be used for any of ASU’s programs, or your client can leave it up to ASU’s discretion on how the returns are used.
Do I have to fix any repairs before I donate the property? What if it needs a new roof?
No, we are often willing take the property as is, if our due diligence process approves it for acquisition.
What if there is debt or a mortgage on the property?
The debt portion could be considered the cash component of a bargain sale, with a gift tax receipt for the difference between the debt owed and the appraisal. Note that any capital gains will be allocated proportionately to the sale.
What type of property will you accept?
We evaluate all types of commercial and residential property, in wide ranging conditions. We do perform extensive due diligence to verify feasibility, and any potential liabilities, prior to acceptance.
Does the property need to be near ASU, or in metro Phoenix?
No, we have accepted property across the country.
Can I donate property that’s held in trust?
Yes, as long as the donor has the authority to transfer the property or trust from one entity to another.
What’s the benefit of a donation or bargain sale?
There are many benefits: potential reduction of capital gains, a deductible tax receipt to use for up to five years plus the year the gift was given, fulfilling a pledge of funds, relief from the burden of upkeep and property taxes.
What properties won’t you take?
Time shares, property without deeded access, property without any access to water or water rights, manufactured homes, potential brownfield properties, but not limited to just these options.
Are there any catches or pitfalls?
The IRS rules for getting deductions are very precise. The IRS requires that the exact property be appraised. For example, if your client is giving a 50% interest in a piece of land, your client must get an appraisal for that 50% interest, your client cannot get an appraisal for the full amount and divide it in half. The magic words are using IRS guidance to get a Qualified Appraisal from a Qualified Appraiser. Failure to meet the IRS guidelines can result in it disallowing the charitable deduction – which means more taxes due.
How will your client’s property benefit ASU?
We work with your client to determine how the proceeds of the gift will be used for any of ASU’s programs or you can leave it up to ASU’s discretion on how the returns are used.
Contact Us
Our team of experts is ready to work with you to talk through your options and develop a gift plan that meets your personal and philanthropic goals.
Contact Brad Grannis to start your journey: Bradley.Grannis@asu.edu or (480) 965-8098..