Gifts of Land, Homes, and Farms
As with many people, your real estate holdings may be your most valuable assets. These assets can also carry a high price: property tax and maintenance costs, if held; capital gains tax, if sold. A gift to the BSA of real property—residential, rental, vacation homes, farms, commercial, or undeveloped—may offer significant benefits.
- Land held for more than one year is deductible at fair market value up to 30 percent of a donor’s AGI for the year. If held for less than a year, it is deductible up to 50 percent of AGI for the year, and the deduction is limited to the property’s cost basis. The five-year carryover rule applies here as well.
- Property with a mortgage or lien usually does not make a good gift. The tax deduction is reduced by the debt amount, and the donor is treated as receiving a similar amount in income, regardless of who is responsible for the debt.
Before deciding how to give real property, know (1) the appraised value of the property and (2) your basis and any debts or liens on the property. Also, please discuss your gift with the BSA so there is a mutual understanding about whether the property will be used, sold, or if there are any environmental concerns.
ESTATE PLANNING TIP
An outright gift of real property can save you time and money. | Avoid continued maintenance costs and capital gains tax on any appreciation in the value of the property. You can also take a charitable income tax deduction based on the fair market value of the property.
Example of Real Estate Gift
Bargain Sales and Gift/Sales
Gifts of real estate are not all-or-nothing propositions. You may donate a partial interest in the land—or certain land rights—instead of donating the entire property. You receive a deduction based on the appraised value of the interest you donate. When the property is sold, the proceeds are distributed accordingly. This is a gift/sale arrangement.
Another option is the bargain sale. Just like it sounds, the donor sells the property to the council at a bargain; it’s part sale, part gift. The council gets a good deal and the donor gets a tax deduction for the difference between the sale price and the value of the property.
Example of a Gift Sale Arrangement
Example of a Bargain Sale
Life Estate Gifts
You may plan to contribute a home, vacation home, or farm to Scouting sometime in the future but—for now—you still want to use the property. A life estate helps you do both. A life estate gift grants Scouting the right to your property after your lifetime, but you retain the right to use and enjoy it for the rest of your life and/or the life of another. If the property is income-producing (e.g., from rent, crops, timber, etc.), you may also keep that income during your lifetime.
- If you make a life estate gift and later decide you no longer want to use your property, simply transfer your remaining rights in the property to the council. You’ll receive additional tax benefits at that time.
- The value of a tax deduction for a life estate gift is determined by the value of the land and the age of the life tenants. The older the life tenants, the larger the tax deduction.
ESTATE PLANNING TIP
You can donate real estate, receive a tax deduction, and still enjoy the property. | Scouting has no right to use or possess the property until after your lifetime, but you still receive an immediate income tax deduction for part of the property’s value. Also, a life estate gift removes the property from your taxable estate, possibly saving estate taxes and probate costs.
Example of a Life Estate Gift