Part Gift and Part Sale

Susan and Kevin bought a vacant lot along Lake Michigan many years ago. They had planned to build a second home so their children could spend their summers along the lake. However, as time went on, Kevin's job kept him in town and the children grew up before Susan and Kevin had the financial resources to build on the land.

Kevin: Over the years, that lot increased in value. It now is worth much more than what we paid for it. We paid about $40,000 for the lakeside property and it is now worth almost $200,000.

Susan: The lot has gone up greatly in value, and with the children out of the house, we were thinking of selling the property. We wanted to sell, but we also wanted to avoid paying so much in tax on the sale. We were thinking of making a charitable gift of 25 percent of the property.

Kevin: I happened to be talking to a CPA at a community luncheon. He mentioned that we could probably give about twice as much with almost the same cost if we gave 25 percent of the property (prior to the sale) rather than writing a check after the sale.

After talking to our tax advisor, we discovered that if we gave a 25 percent interest in the property to the community foundation, we would receive two benefits: We would get an income tax deduction for the value of our gift plus save on capital gains tax on the 25 percent interest given away.

Susan: That is what we decided to do. By giving the community foundation a 25 percent interest in the property prior to the sale, we saved the capital gains tax on that part. The deduction on that part offset a large portion of the tax on the $150,000 we received when the property actually sold. We are very pleased with the "double benefit" from giving the property, and the community foundation received $50,000 to start a charitable fund in our name that will give to our favorite causes and charities now and forever.

Is this gift option right for you? Call your advisor or contact us.

*Please note: The name and image above is representative of a typical fundholder and may or may not be an actual donor to our organization. Since your benefits may be different, you may want to click here to view an example of your benefits.