A charitable gift unearthed
Benefits of Gifts of Real Estate
- Avoid paying capital gains tax on the sale of the real estate.
- Receive a charitable income tax deduction based on the value of the gift.
- Leave a lasting legacy for your community through the PACF.
How to Make a Gift of Real Estate
Your real property may be given to the Foundation by executing or signing a deed transferring ownership, a "Transfer on Death Deed." You may deed all or part of your real property to the Parkersburg Area Community Foundation. Your gift will generally be based on the property's fair market value, which must be established by an independent appraisal, with the gift transaction subject to the PACF's Gift Acceptance Policy.
If you have any questions about gifts of real estate, please contact us. We would be happy to assist you and answer any questions that you have.
Mortgaged Property - Please contact us if the property you wish to give has existing debt or a mortgage. Indebtedness can affect your charitable tax deduction.
Difficult Property Gifts - Certain properties pose challenges. We have adopted policies to limit the acceptance of certain kinds of real estate. Please check with us before making a gift of real estate so we can explain our gift acceptance policies.
Capital Gains Tax - Check with us on the capital gains tax implications of your gift.
How it works
Step 1: Contact the Foundation to discuss the nature and structure of your potential gift. A few important considerations include:
- Form of gift – single family dwelling; occupied/unoccupied; undivided interests in real estate; vacation or second home property; undeveloped land; rental property; apartment building; etc. All gifts are subject to the Foundation’s gift acceptance policies.
- Philanthropic intent – what charitable purposes would you like to see served by the funds that will be received through the sale of the property?
- Form of gift – will you make the gift outright or through your will or use some type of planned giving vehicle (Charitable Remainder Trust, for example)? Income stream – is an income stream necessary from this gift?
Step 2: The Foundation conducts a review of the property to determine whether it can accept the contribution. You will be asked to provide certain documents to facilitate this process. It is the donor’s responsibility to provide an appraisal if the Foundation agrees to accept the property.
Step 3: If the Foundation can accept the property, the Foundation will accept a deed to the property and undertake the process of selling it. The Foundation will provide the necessary gift acknowledgements for tax purposes and hire real estate professionals to sell the property.
Step 4: Sale proceeds, net of fees, will be placed in the charitable fund or giving vehicle of your choice at the Foundation. Proceeds from the sale of real estate can be applied to several different types of fund options within the Community Foundation.
- The Community Grantmaking Fund – is a flexible, unrestricted grantmaking fund that allows the community foundation to respond to our area’s most pressing needs.
- A Donor Advised Fund – allows the donor to recommend grants to his/her favorite causes and nonprofits, which can vary annually.
- A Field of Interest Fund – enables the donor to invest in an area about which he/she is passionate, for example, education or the arts, with grants accomplished through the Foundation’s competitive grantmaking program.
- A Designated Fund – lets the donor stipulate a specific organization (or more than one) to receive the Fund’s benefit in perpetuity. Designated funds can also be restricted to support of individuals, through a scholarship fund, for example.
Ways to work with PACF and gifts of real estate
Contributing property outright is the easiest way to give. Doing so provides the donor with a charitable income tax deduction for the fair market value of the property (property must be owned for more than one year). The donor also avoids capital gains tax that would be due had the property been sold directly. Once the Foundation sells the property at a fair market price, proceeds of the sale can go to any charitable fund of the Foundation identified by the donor.
Betty Smith owns a home with a fair market value of $150,000 and a cost basis of $37,500. If Betty sells the property, she may have a taxable realized gain of $112,500. Betty decides to donate the property to the Foundation, entitling her to a charitable income tax deduction for the full fair market value of the property. When the property is sold, Betty elects to establish a donor advised fund that she will use to support her favorite charitable programs in West Virginia during her lifetime. After her lifetime, she indicated that the Fund was to be used to support the community’s greatest needs. She could also have chosen to designate causes of interest to her to perpetually benefit, or to designate children to serve as successor advisors.
Life income gift
If a donor has highly appreciated, low-yielding property or is interested in converting property into a lifetime stream of income, the donor may wish to consider contributing the property to a charitable remainder trust (CRT). The Foundation will work with one of its Bank partners locally to help the donor to create a charitable remainder trust (CRT) with the Foundation named as the charitable beneficiary. Once the bank has sold the property that is gifted to form the CRT, a donor and/or a spouse can receive income for their lifetimes. The donor also can receive substantial tax benefits now, including an income tax deduction for a portion of the fair market value and reduced capital gains tax from an outright sale, and reduced estate taxes. There are various ways to structure CRTs. A significant advantage of partnering with the Foundation as the “remainderman” for a CRT is that once the income payments have been made, the remaining amount in the CRT can be used to form any type of fund at the Foundation. This means that a donor may select a fund that will forever be used to meet the local community’s needs; to support a cause of interest to the donor (his/her church, school, etc.) or to create a fund from which his/her children could support charitable organizations anywhere.
Mr. and Mrs. Brown (ages 71 and 69) own property that has appreciated in value from $100,000 to $400,000. If they sell the property, the Browns will realize capital gains on the $300,000 gain and be taxed $60,000 (20%). The Browns decide to donate their property to a charitable remainder trust. Terms of CRTs involve an annual payout which will provide them with an income stream at a certain rate for a period of years or the rest of their lives. The Browns also receive an immediate charitable income tax deduction. What motivated the Browns to use the Foundation for their CRT is the charitable legacy the gift will leave behind. Once the CRT terminates, the remaining assets transfer to the Foundation into a scholarship fund which the Browns have named for their family.
Gifts by will or bequest
Leaving real estate to the Foundation through a will or bequest is an excellent way to establish a permanent charitable legacy and avoid potential future estate taxes. This gift also frees your family from maintenance issues, property taxes, or the need to carry liability insurance. You can provide instructions to the Foundation in your will as to the type of charitable fund to be established with the proceeds from the sale of the real estate by the Foundation.
Ruth Hornbook was a tireless supporter of the Parkersburg Humane Society during her lifetime. Upon her death, she left her home on 12th Street to the Foundation, with the instruction that the proceeds of sale be used to benefit Humane Societies in West Virginia. Upon her death, the home was sold and proceeds invested. Since the time of her Fund’s founding in 1990, more than $300,000 has been distributed to support Humane Societies statewide. Because her fund is a permanent endowment fund, it will continue to support the cause she loved in perpetuity.
Louise Netser of Parkersburg left her home on 23rd Street as well. Upon its sale, a permanent fund was created that supports a scholarship in her daughter’s name at Marietta College, and provides an annual payout to the St. Paul’s United Methodist Women, as well as to the Good Samaritan Clinic and Camden Clark Hospital.
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Development and Communications Officer 304.428.4438