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Minnewaska Home Development Foundation Real Estate Gifts You Can "Land" Tax Savings Plus Personal Satisfaction Real Estate and Philanthropy You have many options as to what can be contributed in making a charitable gift: cash, stocks, bonds, collectibles, land, buildings - virtually anything that has value. However, you should be aware of special incentives which Congress created to encourage private philanthropy in various forms, especially real estate. These benefits may include one or more of the following: Reduced income, estate, and property taxes; Lower insurance and upkeep costs; Avoidance of capital gains taxes; Financial security for loved ones; Increased lifetime income; and Continued use of the contributed property during your life. Outright Gifts If you make a gift of real estate to MHDF which you have held for more than one year, you are entitled to an income tax deduction equal to the full value of the property contributed. In addition, you escape capital gains tax on the profit that would have been taxable had the property been sold. Significant estate tax savings are also possible. Gifts by Will An individual may prefer to leave real estate through a will bequest. The gift can be made outright or contingent upon the occurrence of a specific event. For example, a father may want to leave a parcel of land to his only son. However, if the son dies before the father, the will directs that the property will pass to us. Give, But Keep Lifetime Use Owners of a home or farm , even a vacation home, can make MHDF a gift of property, obtain an immediate income tax deduction, and still continue to use the property for as long as they wish. In this case, the donor gives the property to MHDF but retains the right to use it for his or her life (a "life estate"). He or she can continue to live in the home or receive income from the farm, and only after death does the property benefit us. An additional benefit is that by arranging this gift now, rather than in the donor's will, that individual receives an immediate income tax deduction for the present value of MHDF's future right to receive the property. Here is an example: A couple is aged 77 and 75. They have retired, but pay substantial income tax each year. They own the home that they live in, which is currently worth $500,000, and finished paying off the mortgage 10 years ago. The couple plans to live in their home for the rest of their lives, but they also would like to make a significant gift to assist their favorite charitable organization. The couple decides to deed the home to the charity, retaining use of the home for both their lives. Based on their ages and other factors, they will receive an income tax deduction this year of about $220,000. Contribute Just a "Slice" You can also donate a "partial interest" in property and still receive an immediate income tax deduction. For example, you could transfer a 10% ownership interest in your vacation home to MHDF. In order to qualify for the tax deduction, this gift would have to entail complete ownership rights, including the right to use the property. However, the real benefit to us is that whenever the property is sold, MHDF will receive 10% of the proceeds – even if the sale does not occur until after your death. And the real benefit to you, of course, is the charitable deduction you receive for 0% of the value of the property. Give the Land, Keep the Income A charitable remainder Unitrust is the ideal way to use real estate to accomplish your financial objectives in addition to making a charitable gift. A Unitrust is a trust in which property is irrevocably placed, but in which the grantor retains a stated income (usually for life). At the end of the trust's term, the property is distributed to the MHDF. The advantage for the donor is that becuase the trust is created now, the donor is entitled to a substantial income tax charitable deduction. You can use your Unitrust to: establish a lifetime income stream that can grow with inflation; reinvest highly appreciated, low-yield assets without incurring capital gains tax; significantly reduce income taxes; receive investment and administrative services from the trustee; avoid the financial and personal burdens of property management; and make a wonderful gift to MHDF. This is how a Unitrust might work in a hypothetical scenario: A 72-year old individual owns an apartment building currently worth $300,000, which was purchased many years ago for $100,000. The owner has taken straight-line depreciation on the building which has reduced the basis to just $20,000. The owner wishes to move to a retirement community and wants to sell the apartment building and invest the proceeds to provide retirement income. But capital gains taxes could take $50,000 of the profit. The owner could instead transfer the apartment to a charitable remainder Unitrust which will pay a 6% income for the rest of his life. The $50,000 capital gains tax disappears under the Unitrust and the owner receives annual trust income of about $18,000. Based on age and other factors, the owner could receive a charitable deduction on this year's income tax return of about $153,000! For more information, please contact us. Minnewaska Lutheran Home (320) 239-2217 e-mail: info@mlh-healthcare.org The information provides is not intended as legal, tax, or investment advice. Please consult an attorney, tax or financial planning professional for questions specific to your financial situation.

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