Outright Gift of Real Property
Land, buildings erected on or affixed to land, rights (e.g., mineral, air, water), and easements connected with land. Examples of real property include houses, farms, vacation homes, office buildings, or plots of undeveloped land.
What are some benefits of making a gift of real property?
If the real estate gift is an outright gift of property, the donor receives a charitable income tax deduction for the property's full fair market value.
Donating gifts of real property involves a simple title transfer process for donors, and thereafter they are free of the task of managing or selling the property themselves.
Any capital gain from appreciation on the property is not taxable to the donor, provided that the donated property had not been subject to any binding agreement to sell created prior to the gift.
After the gift is made, the property will be excluded from any estate taxes.
What are some details and tax issues regarding gifts of real property?
A donor must file IRS Form 8283 with his/her tax return and obtain an independent appraisal to substantiate the charitable deduction for gifts in excess of $5,000.
Long-term capital gain property (held for more than one year) is deductible at its fair market value up to 30 percent of the donor's adjusted gross income (AGI).
Depreciation in excess of straight line depreciation taken on donated long-term capital gain real property may be "recaptured" and taxed as ordinary income to the donor.
A donor may elect to deduct the "cost basis" of the gift property up to 50 percent of AGI, rather than deduct the fair market value of the property (subject to the limitation of 30 percent of AGI).
Short-term capital gain real property (held for less than one year) is deductible at cost, up to 30 percent of AGI.
A subsequent sale of the property within two years of the date of the gift will be reported to the IRS by Oxfam America on Form 8282.
Contact our gift planning specialist for more information.