1. The Power of Real Estate Donations in an Increasingly Cashless Society
November 15, 2017 Craig R. Stevens, Partner Aronson LLC Chase Magnuson, Realty Gift Fund CFO

2. What We Will Cover
Enormous Wealth exists in primarily non-cash assets yet charities generally ask for cash
How might an Organization unlock potential donations in non-cash assets particularly real estate
Organizations are often reluctant to get involved with real estate and non-cash assets

3. Donations of Property
Donations of property held longer than one year generally provide deductions at the fair market value of the property given
Provides a double benefit – fair value deduction plus not recognizing capital gains taxes
A few caveats :
Adjusted gross income limitations for gifts of property
Any Sec recapture may reduce donation but not that common anymore
Deduction for gifts of personal property limited to cost basis if not a related use
Gifts to private foundations have less tax benefit
Bargain sales still yield a tax deduction for FMV minus amount received with basis allocated between sale and gift portion of agreement

4. Issues Related to Debt
Deduction value of property reduced by outstanding balance of any mortgage or other liability that encumbers the property
Results the same whether the charity assumes the property or receives title subject to the debt
“ Acquisition indebtedness” on a property received by charity potentially subjects them to unrelated business income
UBIT particularly bad for a charitable remainder trust

5. Reporting Requirements
Qualified appraisal for a non-cash gift exceeding $5000 – Form
Donation over $500,000 requires appraisal attached to the return
Lack of compliance can lead to deduction denials and penalties

6. Positioning Yourself to Receive Donations of Real Estate
Acceptance policies
Relationships with qualified real estate consultant or facilitating charity
Approvals from Board, CEO and General Counsel for the program and level of support
Establish cash revolving pool for time sensitive items

7. Straight Donations Free and clear of debt 100 % Ownership by donor
Fractional interests
Donor seeking to fund several charities with same property

8. Bargain Sales (UBIT Issues)
Part cash, part gift (use of cash to pay off debt or for Donor)
Charity can’t provide funds to close – seek a simultaneous closing (Winston Guest case)
Buy out other donors who have no interest in a donation arrangement
Case study on 30 % vacant shopping center
Form 8283 issues to be discussed with buyers

9. Evaluation of Donation Opportunities
Arrange for a title search
Seek Broker’s Opinion of Value
Ask for salability issues
Property inspection reports (radon, environmental, home inspection, roof, ADA )
Physical inspection of property and neighborhood

10. Evaluation of Donation Opportunities (continued)
Consider using a  Single member LLC to take title
I.R.S. Notice (July 31, 2012)

11. Possible Solutions for Donations with a Prearranged sale
Property must be held for investment
Held for more than one year
Prospective buyer willing to accommodate donor with IRS Section exchange (Starker type)
Locate replacement property within the rules
Useful to fund CGAs, CRTs, or Donor Advised Funds  

12. Questions ?