When we think of year-end charitable giving, we usually think of giving cash and publicly traded stock. These make fantastic gifts for charitable purposes, but let’s get creative for a moment and think about other kinds of gifts, like real estate.
Gifts of real estate can have a big impact; following are a couple of recent examples.
Last August the Oregon Jewish Community Foundation sold two parcels of real estate that yielded more than $900,000 in charitable resources for our community. The donors who made these generous gifts of real estate now have the privilege of advising on the distribution of these funds for our community’s needs through their OJCF donor-advised funds.
The foundation recently made a grant of $5 million, the largest grant in the history of OJCF, from the Harold and Arlene Schnitzer Family Fund of OJCF for the benefit of the Cedar Sinai Park capital campaign. These funds were just part of the proceeds from the sale of the Park Tower building gifted to OJCF by Arlene Schnitzer and Jordan Schnitzer in 2013. This was the lead gift in the Cedar Sinai Park capital campaign, and the new building will be named the Harold Schnitzer Health and Rehabilitation Care Center.
Were these transactions fast and easy? No. Were they effective and creative charitable giving strategies? Yes. Charitable gifts of real estate can provide a donor with a current tax deduction, bypass of capital gains and, in some cases, income as well. These are potentially dramatic financial advantages along with the rewards of heartfelt charitable giving – in our tradition of tikkun olam (repairing the world).
Following is a high-level overview of what you should consider regarding creative gifts of real estate.
What to Give
Commercial real estate, a second home, a condominium or land can all be used as charitable gifts. You can also make a gift of your own home and still receive a charitable tax deduction and remain in your home for life. This is known as a life estate reserved.
Appraisals and Valuation
In making a gift of real estate (of a value greater than $5,000), the donor is responsible for determining the value of the real estate by obtaining an independent qualified appraisal. This appraisal should consider all aspects of the property including title, market conditions and comparable sales. The appraisal must be made not earlier than 60 days before the date of the contribution, and before the filing of the tax return on which the deduction is first claimed. The donor must attach IRS Form 8283 to his or her tax return for the year in which the deduction for the gift is claimed.
Tax Deductions
Generally, the donor may obtain a charitable tax deduction for the full value of the real property. The AGI (adjusted gross income) limitation is usually limited to 30% of the donor’s adjusted gross income. The donor should avoid gifting mortgaged property because there can be negative income tax consequences including reduced or complete loss of deduction in certain cases. Always consult your accountant or financial advisor for guidance.
Gift Acceptance Policies
Every well-run nonprofit should have a gift acceptance policy. A professional real estate acceptance policy will outline for the donor all aspects for consideration of the gift in advance, such as required environmental studies, title review, zoning and more. As the donor, you’ll want to understand what expenses, if any, you may be responsible for as part of the gift and also after the acceptance of the gift has been completed. You should review the gift acceptance policy with a professional from the nonprofit early in your discussions about a gift of real estate.
OJCF serves our community of donors and partner organizations in providing this expertise. Other large foundations and charitable financial institutions also have resources for the acceptance and sale of charitable gifts of real estate.
Many Charitable Options
Gifts of real estate can be used to establish income-producing entities such as a charitable remainder trust. The gift can be used to open a new donor-advised fund, a private family foundation or a supporting organization. Each of these has specific structures and all are subject to distinct IRS regulations. You can also make a legacy gift (bequest) of real estate and indicate in your will what you intend for the future use of the funds. You might use such a gift to honor a parent, create a permanent endowment for your synagogue, establish scholarships for Jewish overnight camping, support travel to Israel or whatever purpose you care about most deeply. You can also arrange to involve your children in the future distributions of the funds, if you choose. The right charitable gift of real estate can be extraordinary and transformational – for you, your family and your Jewish and general nonprofit community.
Julie Diamond is the executive director of the Oregon Jewish Community Foundation. OJCF is dedicated to creating, promoting and facilitating a culture of giving and serves as the guardian of permanent funds available to safeguard the quality of Jewish communal life in Oregon and SW Washington. The foundation is the legacy and endowment partner for 28 Jewish community organizations and the proud sponsor of the Life & Legacy program. OJCF does not provide tax or legal information. Always consult your professional advisors regarding your charitable giving. For more information, visit ojcf.org.
