A gift of real estate can be a very efficient way for you to give. When appreciated real estate that has been owned for a number of years is sold, it is probable that you will be faced with a substantial capital gains tax burden.

By gifting real property that has been held at least a year and a day, you are entitled to a charitable tax deduction for the fair market value on the date of the gift and will bypass the capital gains tax due on the appreciation.

Example

John and Mary Smith bought a vacation home 20 years ago for $100,000. They no longer use this home and desire to make a substantial gift to Manhattanville College. The home has grown in value to $350,000. If they sell their home outright and then make a gift, they will owe up to a 20 percent federal capital gains tax on the $250,000 of appreciation, or $50,000.

If the Smiths choose to give their home to Manhattanville, they will receive the following benefits:

• $350,000 charitable tax deduction, which could save them as much as $129,150 depending on their income tax bracket.
• Bypass the federal capital gains tax (up to 20 percent) for a possible savings of $50,000.
• Provide long-term support for the students and faculty of Manhattanville College.

A different strategy is needed when the property has declined in value. Because the fair market value is less than the original price, it is better to sell the property outright and gift the proceeds from the sale. In this way, a capital loss can be established and will offer a tax deduction in addition to the charitable tax deduction for the amount of the cash gift.

Because gifts of real estate can have complications, Please feel free to contact the Office of Institutional Advancement at (914) 323-5439 for more information.

 Please consult with your tax advisor regarding the tax impact of any gift decision.