Real Estate: A Hidden Asset
Should you give real estate?
An outright gift of unencumbered real estate may enable you to make a significant gift to Wheaton without incurring capital gains tax on the transfer of the highly appreciated asset. You may give your entire interest or a fractional interest in the property. A gift of a fractional interest will make you and Wheaton joint owners. A gift of an interest in real property to Wheaton will entitle you to a charitable income tax deduction equal to the fair market value of the interest in the property on the date of the transfer, provided you have owned the property more than one year. In the past, Wheaton has received gifts of personal residences, vacation homes, undeveloped land, and commercial property.
An Outright Gift
An outright gift is the simplest way to convey real estate to Wheaton. You can accomplish this by delivering to the college a properly executed deed, suitable for recording, after review by Wheaton College. Gifts of vacation homes are particularly favorable. The tax law exempts from taxation profits up to $500,000 for married couples filing jointly and $250,000 for single individuals on the sale of their principal residence. This same tax favored status does not apply to a vacation home, unless there is a plan to move into the home and make it a personal residence for two of the five years prior to sale. The appreciation in a vacation home is taxed at the effective rate of 20%, and there are no longer any rollover provisions available on the sale of the home.
Benefits to you
- You are able to make a significant gift to Wheaton.
- You receive a charitable income tax deduction on the fair market value of the property.
- You escape any potential capital gains tax on any appreciation the property has realized.
Gift of a remainder interest in a residence or farm
You may wish to consider a gift of your property now, reserving the right to live in it for the rest of your life. The term personal residence is broadly defined by the Internal Revenue Service to include any property used by the taxpayer as a personal residence - even though it may not be used as a principal residence. A single-family dwelling, condominium, vacation home or stock owned by you as a tenant-stockholder in a cooperative housing corporation qualifies as a personal residence if used by you each year. The term "farm" includes any land used by you or your tenant for the production of agricultural products or for the sustenance of livestock.
Benefits to you
- You are able to make a significant gift to Wheaton.
- You receive a current charitable income tax deduction for the present value of the remainder interest.
- You escape any potential capital gains tax on any appreciation the property has realized.
Gifts of real estate in trust
You may wish to explore ways to convert real estate into income - producing gift plans. This may be accomplished by several methods, but in most cases, the real estate is placed in a trust and then sold and reinvested to produce income.
Benefits to you
- You may qualify for a charitable income tax deduction for a portion of the fair market value of the property placed in trust.
- You can avoid the capital gains tax liability due on the sale of the property.
This page is maintained by The Office of Gift Planning. Last updated on 9/27/06.
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