Using Real Estate in Charitable Giving

By: Laurie Valentine- COO & Trust Counsel 

If you own a home or other real estate that you no longer want to live in or manage, and you are thinking about making a charitable gift to your church and/or other Baptist cause(s), consider using that real estate to accomplish your charitable giving objectives.

An outright gift of real estate that has appreciated in value can provide double benefits---an immediate income tax deduction equal to the current market value of the property gifted and avoidance of the capital gains tax that would be owed if you sold the property.

If the property’s value has depreciated, a sale of the property followed by a gift of all or a portion of the sale proceeds may provide both a charitable income tax deduction and the capital loss deduction on your income tax return.

Like gifts of other types of assets, gifts of real estate do not have to be an “all or nothing” proposition.

If you are not comfortable with giving up the full value of the property, a bargain sale to the Baptist cause you wish to benefit may be the answer. In a bargain sale you agree to sell the real estate to the charity for a price which is less than its current market value. The transaction is part gift (the difference between the market value and the sale price) and part sale. You get a charitable income tax deduction equal to the gift portion of the transaction and only incur capital gains tax on a the sale portion; and the charity gets the property for a below market price.

Real estate may also be used to fund a charitable remainder trust (CRT). A CRT pays an income stream to the giver and/or others for life or a term of years, with the remainder passing to the causes you designate at the end of the trust’s term.

When considering a gift of real estate, consider its marketability, current value and whether there is a mortgage on it. These issues may affect the way in which your gift should be made to be most beneficial to you and the causes you wish to benefit.

For more information, please call us at (502) 489-3533 or toll free in KY at 1-(866) 489-3533

The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.