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For those donors looking to donate debt-free real estate to UMB, whether it's residential, agricultural, industrial, or undeveloped, there are four options at your disposal:
- You can give it outright, and the Foundation handles the sale, delivering the sales proceeds to the School, Department, fund, or designation you make.
- You can give it, the Foundation sells it, and you receive income.
- You can give it and live in, use, or rent it out the rest of your life.
- You can sell it at a discount to the Foundation, which in turn sells it and applies the gross proceeds to your designation.
Option One: Outright Gift
Donating real estate outright provides the donor three benefits:
- The donor receives a charitable deduction equal to the Fair Market Value of the property.
- The donor avoids recognizing the appreciation and sale of their tax return, reducing taxes that would be due on the sale.
- The donor removes themselves from the risk, uncertainty, and hassle of selling the property.
Option Two: Give It and Receive Income
- The donor establishes a Charitable Remainder Unitrust and donates the property, avoiding recognition of the appreciation and sale on their tax return.
- The donor selects one or more Income Beneficiaries (themselves often being one of them), to receive variable income for either lifetime or a term of years.
- The donor receives a charitable deduction equal to the Fair Market Value less the value of projected income to be received.
- The Trustee (which can be UMBF) markets and sells the property, invests the proceeds in a balanced portfolio, and begins paying income to beneficiaries.
- At the end of the income period, the trust remainder goes to the School, Department, fund, or designation of the donor.
Option Three: Give It and Live In It for Life
- The donor transfers title of the property to the Foundation, and retains life tenancy rights of the property, called a Retained Life Estate gift.
- The donor continues to live in, use, rent out the property during their lifetime(s), and also continues to pay taxes, insurance, and maintenance costs.
- If the donor wishes to move or relinquish tenancy rights, they can request a joint sale, which subsequently gives the donor two options:
- Receiving cash proceeds from the sale representing their remaining life tenancy.
- Receiving a second, new charitable deduction equal to the life tenancy value being surrendered.
- After the property is sold, the proceeds are delivered to the School, Department, fund or designation selected by the donor.
Option Four: Sell the Property at a Discount to the Foundation
- The donor sells the property to the Foundation at a discounted price, typically not more than half its fair market value, called a bargain sale.
- The difference between what the Foundation pays and the fair market value is allowable as a charitable deduction on the donor’s tax return. For example, if the Foundation paid a donor $150,000 for a property valued at $500,000, the donor would receive a charitable deduction of $350,000.
- The Foundation sells the property, reimburses itself for the purchase cost, and directs the remaining sales proceeds to the designation of the donor’s choice.