Gifts of Real Estate
A gift of all or part of almost any piece of real estate, including a primary residence, vacation home, farm, undeveloped land, rentals, businesses, condominiums, timber, mineral rights and other natural resources.
A donor should consider several points when thinking of a gift of real estate:
- Clarkson should be able to use or easily sell the property.
- Ideally, there should be no easements on the property.
- The donor should have a clear title to the property.
- There should be no environmental hazards on the property.
- The donor may need to obtain an appraisal to claim a charitable deduction.
- It will take a little time to complete the gift.
Outright Gift: As an outright gift, Clarkson may use the real estate or the University may sell the property and use the net proceeds from the sale for whatever purpose you designate when you make your gift.
Bargain Sale: In a bargain sale agreement, a donor sells real estate to Clarkson at a portion of its market value. The difference between the sale price to Clarkson and the appraised value is a gift from the donor. Clarkson then sells the property and uses the net proceeds from the sale for whatever purpose designated by the donor.
Retained Life Estate: You may gift your home, farm or vacation residence to Clarkson now and retain the right to live there for the rest of your life through a retained life estate. You receive an immediate income tax charitable deduction for the future gift value of your property. You reserve the responsibility to maintain and pay taxes on the property during your lifetime. When you leave the property, Clarkson will use the net proceeds from the sale of the property for whatever purpose you document at the University.
Charitable Remainder Trust: Real estate may be used to fund a charitable remainder trust. The property would most likely be sold and the net proceeds reinvested to provide income to the donor(s) and/or other beneficiaries for life and/or a term of up to 20 years. Income payments would vary year to year, depending on the annual revaluation of trust assets. When the trust ends, the remainder passes to Clarkson. Properties with existing mortgages may pose special circumstances for charitable remainder trusts. Although rare, it is also possible to fund a charitable gift annuity with real estate.
Estate Gift: A donor may create a bequest provision in a will or living trust describing a specific property. The gift may come to Clarkson unrestricted or you may wish to restrict it to a certain purpose. It may also be possible to pass the property to a testamentary charitable remainder trust to provide income to heirs before the remainder someday passes to Clarkson.
Charitable Lead Trust: In special circumstances, a donor may place an income producing property into a charitable lead trust for a term of years. During the term, income from the trust is paid to Clarkson. At the end of the term, the property passes either back to the donor or on to heirs estate tax free.
Depending on your circumstances, your gift of real estate may count in Clarkson fundraising campaigns, in your next anniversary reunion, and towards Roundtable annual recognition. Contact the Annie Clarkson Society for help related to your unique circumstances.
Tax and Financial Implications
If you itemize, a gift of real estate may generate an income tax charitable deduction up to 30% of your adjusted gross income. Any excess deduction may be carried forward for up to five additional years.
To claim an income tax charitable deduction for any gift of real estate, the donor must acquire and file an independent appraisal from a qualified, independent appraiser.
For an outright gift, the donor may not need to declare any capital gain on the property and may be eligible for an income tax deduction at the full appraised value.
In a bargain sale, the donor may be eligible to declare the difference between the sale price to Clarkson and the appraised value as a charitable gift. Any capital gain on the property may be apportioned between the sale price and the appraisal value, so the donor may need to declare capital gain attributed to the sale price.
Real estate gifts to retained life estates and charitable remainder trusts may be eligible for an income tax deduction for a portion of the appraised value of the property. The circumstances of the gift plan at the time the gift is made determine the value of the deduction. In most cases, the donor will not need to declare any capital gain when making the gift. Mortgaged real estate requires a special review of the circumstances involved.
This web page does not provide legal or financial advice, nor is it a comprehensive review of the topic. You should consult your legal and financial advisors and Clarkson University before making or planning your gift. (rev. 11/2014)
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