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A farm, personal residence, unimproved land or commercial
property may make an excellent gift for you and the
Colleges. The Colleges will work with you to maximize
gift potential.
Several gift opportunities are available for real estate.
An outright gift entitles you to a charitable deduction
equal to the fair market value of the property on the
date of the transfer, without capital gain tax liability.
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Example: Mary
Nelson '63 owns a piece of property on Seneca
Lake that she purchased five years ago for $10,000
and that is now worth $50,000. A librarian, she
wants to support the Warren Hunting Smith Library.
By donating the land to the Colleges, she will
be able to take an income tax charitable deduction
for $50,000, which in her 27 percent tax bracket,
means that she will save $13,500 in income taxes.
If she sold the property, she would have incurred
$8,000 in capital gain tax. |
How can I generate
income by donating real estate to the Colleges?
Real estate can be used to fund a charitable remainder
trust. The trust can provide you (and another named
beneficiary, if you wish) with lifetime income. In addition
to an income tax charitable deduction, you will not be
liable for capital gain tax when your assets are transferred
to the trust. The type of trust that is appropriate
will depend on whether the property is improved or rented
or, if it is anticipated that the property will be sold
after it is transferred to the trust, the timing of
the sale.
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Example: Jim
Harris, 50 years old, owns a piece of unimproved
property in the Adirondacks that has increased
in value from $50,000 to $100,000 over the past
five years. He has decided not to build on his
property and would like to give it to the Colleges.
He also wants to supplement his income without
having to pay $10,000 in capital gain tax, which
would leave him only $90,000 to reinvest. He gives
the property to the Colleges through a charitable
remainder unitrust. The trustee sells the property
without incurring capital gain tax at the time
of the sale and pays Jim 6 percent on the entire
$100,000. He is able to take a charitable tax
deduction for almost one-quarter of his gift,
thereby saving $8,800 in income taxes. |
How can I contribute real
estate while retaining life use of my property?
If you wish to contribute your primary residence, a
second home or a farm, but want to continue to use that
property during your lifetime, you can do so. You can
give a remainder interest to the Colleges, retain life
use, and generate a current income tax charitable deduction.
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Example: Mr.
and Mrs. Phillips own a house that they want to
continue to use. They decide to donate it to the
Colleges while using it for the rest of their
lives. The value of the home is $75,000.
Given their ages, 65 and 60, they will be able
to take an income tax deduction of $16,400 and
then reinvest their savings to provide more income.
During their lifetimes, they will continue to use
and maintain their home as they have always done,
and they know that they have made a very special
gift to the Colleges.
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How can I contribute property that has a mortgage?
If you have property that you would like to donate, perhaps commercial or vacation property, but there is still a mortgage balance on the property, you may utilize a bargain sale. A bargain sale occurs when a donor sells property to Hobart and William Smith Colleges for less than the property’s fair market value. The amount of fair market value over the sales price is the donor’s charitable contribution, which may be reduced by allocation of tax basis and reduction rules relating to unrealized gain. Almost any type of asset may be sold in a bargain sale, depending on the cash available for purchase and the suitability of the asset. More information is available regarding bargain sales.
Please Note:
Gifts of this nature should be carefully considered
in relation to your comprehensive financial and estate
plans. We strongly recommend that you consult an attorney
in the preparation of your will or living trust and
to supervise its execution so as to comply with your
state's requirements.
Thank you for
remembering Hobart and William Smith Colleges.
| Recent HWS Example:
Stephen ’40 and Betty (Allsopp)
’42 Eaton – Real Estate |
The Eatons used a
vacation home in 1996 to fund a charitable trust
providing them with a lifetime of income. The
trust will establish an endowed Hobart and William
Smith Scholarship in their name. |
Please note, individual financial circumstances will vary. The information on this site does not constitute legal or tax advice. As with all tax and estate planning, please consult your attorney or estate specialist. All material is copyrighted and is for viewing purposes only. Use of this site signifies your agreement with the terms of use. This Planned Giving section has been developed for Hobart and William Smith Colleges by Future Focus.
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