Real Estate Donations
Real Giving
Over $300 billion is donated annually to charities in the United States.1 But despite the fact that more than 40% of the wealth in the United States is comprised of real estate,2 less than 2% of charitable contributions are derived from real estate assets.3
Why? Many financial advisors are simply unequipped to advise their clients on transactions dealing with real estate due to the complexities of managing, appraising and selling real estate. Most advisors lack the resources and expertise to advise on real estate assets as the analysis and sale of real estate is a highly specialized trade.
Similarly, donors who have charitable intentions may be unwilling to dispose of what may constitute a significant portion of their net worth in the form of real estate without the benefit of ongoing financial security through consistent current income or capital appreciation.
For Owners of Appreciated Real Estate
An investment in real estate can provide unique investment portfolio benefits. Property owners may enjoy a steady stream of income, capital appreciation and property-related tax advantages. Yet despite these benefits, some property owners may no longer be interested in actively owning and managing property – or they may be at the stage in their lives where they are considering their estate plans or charitable legacy.
For owners of appreciated real estate who are considering selling their property, however, capital gains taxes can be prohibitive. And while a traditional 1031 exchange may be right for some property owners, a 1031 exchange does not offer any kind of charitable giving solution for those more philanthropically driven property owners. Importantly, 1031 exchanges prohibit the exchange of primary residences or personal use properties – thereby eliminating a large population of property owners.
Acceptable Forms of Real Estate Donations:
- Residential properties
- Land/agriculture
- Rental houses
- Apartment buildings
- Shopping centers
- Warehouses
- Office buildings
- Vacation homes
- Other real estate investments:
- TICs
- Timber rights
- Mineral rights
- Oil and gas interests
- Real estate limited partnership interests
1 Executive Summary, Bequest Donors: Demographics and Motivations of Potential and Actual Donors, A Report Prepared for Campbell & Company, March 2007. Researched and written at the Center on Philanthropy at Indiana University, by Campbell & Company Research Fellow, Emily Krauser.
2 New York Times, 2002.
3 “Individual Noncash Contributions, 2004,” article by Janette Wilson and Michael Strudler.