|
Have a Building? Why Not Donate to A Place of Comfort, Inc.
| The following information can be found at Real Estate for Charities, http://www.realestateforcharities.org. They are the premier consulting provider for corporations, charities, and individuals considering donations of real estate. If you are seriously considering making a real estate donation to A.P.O.C., you may want to visit their website. Here you will obtain more detailed information that may clarify any concerns as well as answer any questions you may have. |
|
What are the advantages of donating real estate, rather than selling it?
The concept of donating versus selling is most easily explained with an example (Ref: http://www.realestateforcharities.org):
A 69 year old widow owns an office building. She would like to maximize the benefits of the asset for her children, and support her favorite charity, if possible. The table below summarizes her options. After careful consideration, she found the greatest benefit to her children and the charity was to donate the building.
|
|
|
Real Property Liquidation
|
|
|
Sale & subsequent death
|
Hold & subsequent death
|
Donation
|
|
Value
|
Appraised value $10mil; (example assumes full sale price)
|
$10 mil
|
Donor gets credit for full amount of appraised value ($10mil).
|
|
Seller’s Current Basis
|
$500k
|
$500k
|
N/A
|
|
Sales Cost
|
$500k
|
N/A
|
Donor avoids any sales cost, recapture, capital gains taxes, and a portion of his ordinary income tax and eventually estate taxes.
|
|
Recapture on Sale
|
$3mil (tax $900k 30%)
|
N/A
|
|
Capital Gains Tax (25%)
|
$1.5mil
|
N/A
|
|
Net from Sale
|
$7.1mil
|
N/A
|
Annual income payment will be arranged at $700k for the rest of donor’s life (subject to income tax).
|
|
Federal Estate Tax on Net From Sale
|
$3.9 mil due at death
|
$5.5 mil
|
N/A
|
|
State Inheritance Tax (7%)
|
$500k
|
$700k
|
N/A
|
|
Heirs receive…
|
$2.7 mil after tax
|
$3.8**
|
Upon death of donor, heirs receive $6mil, tax free from life insurance trust fund.*
|
|
Additional notes: In the "Sale" scenario, to generate an income of $700k/year (as in Donation scenario) on the proceeds after selling the property, donor would have to invest long term safely at 11% rate of return.*- Due nine months from death in cash
**- Less sales cost and discount for cash
|
|
|