Gifting appreciated real estate is a great way of avoiding both capital gains and income taxes. In addition to these tax savings, the tax deduction for the value of the land can significantly improve your income tax picture.
Take the example of Mr. and Mrs. Smith. The Smiths started out farming when they got married 65 years ago. Due to limited means and man-power, all they could afford was an eight-acre piece of land that was oddly-shaped and had a small stream curving through it that made planting and harvesting a challenge. Over the years, they were able to buy numerous full sections of land and had stopped farming their original eight acres decades ago. But they never sold the land for sentimental reasons. Now, dealing with several health issues and advancing age, the Smith’s started divesting their estate, and wanted to give the land to Friends University. Their financial advisor pointed out that the land cost $45/acre when they were married but today was worth almost 100 times that amount. As a result, capital gains taxes would apply to nearly the entire amount of the sale.
By making the real estate gift outright instead of selling and giving the cash to Friends, the amount of their investment in Friends University increased from $28,500 to $36,000, a sizable difference to nearly any charitable organization.
Gifts of real estate can be made during the lifetime of a donor, or can be included in your will or trust for allocation through your estate plan. For more details about how to give real estate to Friends University, contact: