Commercial Real Estate
Commercial Real Estate is a very common gift to the Church or one of its institutions. In your real estate portfolio, you may have commercial properties from which you have received significant rental income and depreciation benefits. These commercial properties may now present undesirable challenges, including the need for time-consuming management, an obligation to pay increased maintenance costs, and the prospect of substantial capital gains taxes if the property were sold. By giving your commercial real estate to the Church or one of its institutions, you are relieved of management responsibilities, avoid capital gains taxes, reduce your estate tax, and fulfill your charitable and family objectives.
The typical donor:
- Holds title to the commercial real estate.
- Owns commercial real estate that is without debt.
- Desires to reduce management responsibilities.
- Has taken advantage of available depreciation.
Gift features and benefits:
- Immediate income tax deduction
- Avoidance of capital gains taxes
- Deduction based on fair market value, or present value of remainder interest if placed in a Charitable Remainder Unitrust
- Gift can be timed to take advantage of market value
How Do I Make a Gift of Commercial Real Estate?
A gift of commercial property to the Church or one of its institutions must be reviewed and evaluated by the Church Real Estate Division. Philanthropies can assist you with this process. A Real Estate Packet (Download Adobe Acrobat to view this packet) of specific information about the commercial property must be completed and sent to Philanthropies. Once a Real Estate Packet is received by Philanthropies, the evaluation process may take 60 to 90 days to complete. This process includes a physical inspection, environmental assessment, title report, appraisal, and so forth. When the evaluation is complete, you will receive notification of the results.
For tax purposes, you must obtain your own appraisal to determine the fair market value you claim on your income tax return. Your tax return must include IRS form 8283 signed by your appraiser.
How Do I Make a Gift of Commercial Property Using Gift Planning Tools?
Commercial property can also be given by funding a Charitable Remainder Unitrust that provides you income for life and numerous tax benefits. In larger estates, commercial property can be used in conjunction with a Charitable Lead Trust to provide annual income to the Church or one of its institutions for a period of years, following which you transfer tax-free growth in the trust to your heirs. Commercial property can also be given through your Will or Revocable Trust.
Other Facts You Should Know about a Gift of Commercial Real Estate
Any tangible personal property associated with a commercial real estate gift may involve accelerated depreciation and the potential for unrelated business taxable income (UBTI). You should consult your professional advisors concerning this possibility. Philanthropies professionals will be happy to discuss this and other issues related to your gift of commercial real estate with you and your team of professional advisors.