The benefits of making a real estate gift to Florida State University include:
- Eliminating long-term capital gains tax on an appreciated asset;
- Receiving a charitable income tax deduction based on fair market value;
- Avoiding the time, effort and expense of owning property; and
- Supporting your favorite program at FSU.
Gifts of real estate, such as undeveloped land, a residence, a vacation home, a farm or commercial property, should be arranged through the Office of Gift and Estate Planning and made through Florida State University Real Estate Foundation. As is true with any real estate transaction, there are certain costs incurred when making a gift of real estate, such as an appraisal to determine the fair market value of the property. In advance of the donation of the gift, the donor and the academic unit or fund benefitting from the gift will agree in writing who will be responsible for paying these costs.
Real estate can be given through outright gifts and by making deferred gifts.
Making a Gift of Real Estate
The most popular way to make a gift of real estate is to transfer the property’s deed to The Florida State University Real Estate Foundation. In most cases, the donor intends to support a particular academic unit on campus. In these situations, the Real Estate Foundation will oversee the sale of the property. Once the sale is complete, the FSU Real Estate Foundation will transfer the proceeds to the FSU Foundation, where the funds will be invested or distributed in a manner that supports the donor’s specific intent.
Upon making a gift of real estate, the donor is entitled to a charitable income tax deduction based on the value as determined by a qualified appraisal. Currently, the deduction available may be up to 30 percent of the donor’s adjusted gross income in the year the gift is made, and it’s possible to carry over any unused portion of the deduction for five consecutive years. In most cases, donating real estate avoids any capital gains tax that would result by selling the property outright.
There are two methods for making a current gift of real estate:
Create a legacy and receive a tax benefit
When making an outright gift of real estate held for more than a year, the donor obtains an income tax charitable deduction equal to the property’s full fair market value. This deduction reduces the cost of making the gift and frees cash that otherwise would have been used to pay taxes. By donating the property to Florida State University, a donor also reduces capital gains tax on the property’s appreciation. Furthermore, the transfer isn’t subject to a gift tax, and the donation reduces the donor’s taxable estate.
Receive cash and a tax deduction
A bargain sale is a process whereby a donor sells their property to a charitable organization such as the Real Estate Foundation for a price less than fair market value. The donor receives cash proceeds from the sale equal to the agreed upon sale price. The difference between the Fair Market Value as determined by an appraisal and the bargain sale price is the charitable contribution received from the donor. While the proceeds from the sale are taxable, the income tax charitable deduction from the gift may offset all or a portion of the taxes for the year the sale occurs. Along with a deduction that may reduce the donor’s tax bill, other benefits of the bargain sale include the reduction of capital gains tax on the charitable gift and the opportunity to reinvest the proceeds from the sale of the gift to create additional income for their future.
Using Real Estate to Make a Deferred Gift
Often times, donors desire to gift their real estate, but have a need for income, use of their properties during their lifetimes, or other personal financial objectives. Under the right set of circumstances, the options described below can provide a significant gift to the university as well as satisfy the financial goals of the donor.
Give real estate through your will
Some of FSU’s most significant gifts have come from the estates of its donors. In certain cases, donors have bequeathed real estate to FSU for the purpose of supporting an academic program. Because a will is revocable (that is, a donor can change their mind at any time), the donor will not be able to take an income tax deduction at the time of the bequest, but rather, the property will not be taxed as part of the donor’s estate. An important provision in a bequest is that, through a will, the donor may give another person lifetime use before possession passes to the FSU Real Estate Foundation
Give your property, but enjoy lifetime use
If a donor would like to receive a current income tax deduction for a gift of property, but would also like to continue using it throughout their lifetime, the donor can give Florida State University a “remainder interest” in the property and retain a “life estate” for themselves or anyone they choose. The holder of a life estate continues to maintain the property while they are living, which includes paying taxes and the cost of any insurance. When ownership of the property transfers to Florida State University, the University will administer the property as described in a gift agreement and distribute the proceeds of the property upon the sale in accordance with the donor’s intent as described in the gift agreement. Virtually any type of property can be used to establish a retained life estate.
Obtain a life income from your gift
By establishing a charitable remainder unitrust funded with unencumbered real estate, a donor can provide a future gift to support Florida State University while receiving a tax deduction and a long-term income stream. Once the property has been transferred to a trust, the trustee — which could be FSU’s Real Estate Foundation — can then sell it and invest the proceeds through the FSU Foundation. These investments can provide income payments to the donor and any other recipient they name for either a lifetime or a term of years. When the trust terminates, the Foundation will receive the remainder in the trust.
Give real estate and a gift to loved ones
A donor who wishes to support Florida State University, receive a tax deduction, and simultaneously transfer appreciated real estate to their loved ones tax-free, should consider funding a charitable lead trust with real estate that is income-producing and expected to increase in value over the term of the trust. During the term of the trust payments are made to benefit FSU; at the end of the trust term the remaining assets are transferred to the beneficiary or beneficiaries designated by the donor.
Give your property and direct your support
A donor advised fund can make grants to various charitable organizations within Florida State University based upon recommendations from the donor. By donating appreciated real estate to a donor advised fund, the donor can earn generous tax benefits, support their favorite causes, and free up time for other pursuits. A donor advised fund is administered by the FSU Foundation on behalf of the donor and allows the donor to recommend grants on their own timetable.
Disclaimer: The information above is intended to assist you in your tax, estate, and charitable planning. It is not legal or tax advice and should not be relied upon as such. For such advice, please consult an attorney or tax adviser.