Commercial Investment Real Estate March/April 2016 | Page 12

BUSINES S
Real Estate Gifts
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by Mary Stark-Hood, JD, CFP
With the upturn in the economy, charitable giving is on the
rise. Philanthropy is now a $4 trillion-plus industry, according
to the National Center for Charitable Statistics.
Although the majority of donations are
cash or securities, real estate can also be
donated to nonprof t organizations. Both
individuals and corporations may have real
estate investments they no longer wish to
retain, so at some point commercial real
estate professionals may encounter clients
who are interested in donating property to
charitable organizations.
Real estate gif ing is a prof table niche that
CCIMs and other well-versed profession-
als can add to their roster of client services.
While anyone at any stage of life can donate
real estate, in particular, high net worth
individuals, business owners, and property
investors who are nearing retirement may f nd
that the tax benef ts of gif ing real estate may
help them meet their estate planning goals.
In some cases, donating a property creates a
larger gif than if a donor sold the property
and gave the proceeds to the organization.
A property donation can benef t the owner
by lowering transfer expenses, reducing
capital gains taxes, and providing charitable
deductions at the federal level and sometimes
at the state level, depending on state law.
Gifting Steps
Individuals and companies donate for a
number of reasons. For individuals, it may
be due to a philanthropic intent, a desire to
use and qualify an appreciated asset as a
charitable donation for tax deduction pur-
poses, a need for supplemental retirement
income, or a desire to establish a legacy for
family members.
Corporations may be looking to provide
support in a local community, divest an
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March | April | 2016
underperforming asset, utilize the value of
the asset as a deferred compensation vehicle
for executives, or fulf ll philanthropic objec-
tives for public relations purposes.
At this early stage in the process, the donor
should seek the advice of an accountant,
attorney, or f nancial adviser. T is person
should be someone who has enough infor-
mation about the donor’s f nancial picture
to evaluate the f nancial impact of the dona-
tion and assure the donor that the value of
the donation can be utilized as a charitable
deduction on the donor’s income tax return.
A preliminary f nancial review is of value,
as there have been instances where a dona-
tion was very large in comparison to an indi-
vidual’s adjusted gross income and therefore
a portion of the donation as a charitable
deduction was lost.
Once the donor f nalizes the decision to
move forward with a donation, a qualif ed
charitable organization must be willing to
accept the gif . Qualif ed charitable organi-
zations are 501(c)(3) entities under the Inter-
nal Revenue Code.
T is is the stage where real estate donations
of en break down and where commercial real
estate professionals can add value to the pro-
cess. Most charitable organizations are not
knowledgeable about the real estate gif ing
process. T ey are concerned about possible
risks in taking property, and most don’t have
the knowledge to undertake the necessary
due diligence, handle the transaction, and
dispose of or manage the property. T ey’re
also concerned about legal and tax issues.
Approximately 80 percent of real estate
donations are rejected, even though the aver-
age value of a real estate donation is in excess
of $500,000. Charities that accept real estate
generally resell it and obtain cash, rather
than holding and managing the property.
If a donation makes sense for both the
donor and the charity, specif c duties are
assigned to the appropriate members of both
teams through closing. Team members may
include brokers, leasing professionals, invest-
ment counselors, asset managers, appraisers,
environmental engineers, structural engi-
neers, property managers, corporate real
estate executives, developers, institutional
investors, lenders, and attorneys.
There are several ways to donate real
property to a charity, including an outright
donation, a bequest under a will, a real
estate transfer in exchange for a guaranteed
life income under a contract (charitable gif
annuity), a charitable remainder trust, a
bargain sale, and a retained life estate. T e
nuances and complexities of each type vary.
T erefore, experienced professionals need to
be involved in each transaction.
CCIMs and other professionals can learn
how to assist clients with real estate donations
by attending “Making Transactions Hap-
pen With Real Estate Gif ing,” a new course
of ered through CCIM Institute’s Ward Cen-
ter on Real Estate Studies. T is program iden-
tif es how to assist clients in achieving their
donation objectives. As you gain experience
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