Gifts of Income Property: An End to Headaches
Income property can be a great investment — or an enormous headache.
Here are some ways that the Marin Community Foundation can provide relief to your clients when they start getting headaches from their income property.
Whether your client wants to retain the income the property yields or not, using the property to make a charitable gift offers some important advantages:
- Donors benefit from the property's full value. When appreciated property is donated to charity, including to a charitable remainder trust, it avoids all capital gains tax.
- Donors may claim an income tax deduction based on the full value of the property in the year of the gift. If the gift is to a charitable remainder trust, the amount of the deduction will be calculated based on the property's full current value.
- The value of the property is removed from the donor's taxable estate, reducing future estate tax liability.
- Last, but certainly not least, the donor makes a substantial charitable gift.
Here are some specific problems that can be addressed through the charitable uses of income property:
Problem: Client feels trapped by capital gains tax.
Solution: Enlist the help of the Marin Community Foundation. By using the property to fund a donor-advised fund now or by establishing a charitable remainder trust that will distribute income for life, the donor will avoid capital gains tax while benefiting from the full value of the property.
Problem: Client is reluctant to give up the property because s/he needs the income the property is producing.
Solution: With a charitable remainder trust, s/he will continue to receive income for life (or ensure income to another person). Often the income from the trust exceeds the current net income from the property itself.
Problem: Client is willing to give the property to charity, but is unsure which one or if it will be used properly.
Solution: With a donor-advised fund, your clients can decide later which charities to support — and even get advice from MCF's professional staff.
