Outside-the-box gifts to charity: Real Estate
Most people think of donating cash or appreciated stock when making a gift to a Foundation. But recently, a donor came to the Jewish Community Foundation, the planned giving arm of Minneapolis Jewish Federation (MJF), with an unusual request: he wanted to contribute to his fund through a real estate transaction.
“It’s an infrequent request,” says Alene G. Sussman, Jewish Community Foundation, “but it’s something Foundation has the ability and expertise to handle. I just don’t think people know it’s an option. Many Foundations often require complex gifts like this to be a much larger amount—this one was under $100,000.”
Here’s the details on how it worked:
The donor, who wishes to remain anonymous, owned a partial interest in a commercial property in Minneapolis that had appreciated since the donor’s initial investment.
The donor wanted to eliminate paying capital gain taxes on a portion of this appreciation and receive a charitable donation deduction of the fair market value by donating a portion of this ownership interest to their fund.
To accommodate the donor’s desires while also shielding MJF from potential liability related to owning real estate, a two-step process occurred:
First, a single purpose, single member Minnesota limited liability company (LLC) was created in which the partial interest to be donated was transferred.
Next, the donor gifted the donor’s membership interest in LLC to MJF for the benefit of their fund.
At the time of a real estate gift, the donor should be able to take a charitable tax deduction for the fair value of the donated gift and eliminate having to pay capital gain taxes on the appreciation.
When the property sold, the donor’s portion of the sale’s proceeds were deposited with MJF in their fund, from which grants can be made to Jewish causes around the U.S.
The donor recommends this method as a smart tax strategy.
“Through this transaction, I could deduct the full amount of the charitable gift without paying taxes on the portion of the appreciated property donated,” he says. “This way, I was able to both save on my taxes and give a five-figure charitable donation I feel really good about.”
“While this type of transaction involves a bit more legwork than the average transaction, it is one that pays off in the long run for the donor,” says Alene.
Above all, Alene says, she is thrilled to connect donors with their passions in whatever way works for them. “This donor deeply cares about Jewish education and was looking to sell property. We were able to work with the donor’s advisors and help guide the transaction to help meet their needs and to invest in the community on their terms. It’s the perfect example of fulfilling the donor’s wishes and the Jewish Community Foundation’s mission.”
The Jewish Community Foundation of the Minneapolis Jewish Federation does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Please consult your own tax, legal and accounting advisors before engaging in any transaction.