Real estate in the form of unimproved property is a common gift to the Church or one of its institutions. Your unimproved property may have increased substantially in value during the time you have owned it. By selling such property, you will face substantial capital gains taxes. If you gift the property to the Church or one of its institutions you avoid capital gains tax, may reduce your estate tax, and advance long-term charitable and family objectives.
Often, unimproved property is non-income producing and can be placed into a Charitable Remainder Unitrust and sold without capital gains taxes. The entire proceeds are then reinvested to provide you with income for retirement needs. A portion of the income may also be used to purchase life insurance in an irrevocable trust that will replace the value that the unimproved property represented in your original estate. This replacement value will generally not be subject to gift or estate taxes.
The typical donor:
- Holds title to the unimproved property.
- Owns the unimproved property without debt.
- Wants to make a significant gift to charity.
- Wants additional income (by placing the property in a charitable remainder unitrust).
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 changes in market value
How Do I Make a Gift of Unimproved Property?
A gift of unimproved 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 unimproved 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 Unimproved Property Using Gift Planning Tools?
Unimproved property can also be given by funding a Charitable Remainder Unitrust that provides you income for life and numerous tax benefits. In larger estates, unimproved 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. Unimproved property can also be given through your Will or Revocable Trust.
Other Facts You Should Know about a Gift of Unimproved Property
In many cases non-income-producing unimproved property can be converted to an income source for you and your family. Often, unimproved property is highly appreciated and is subject to increasing property taxes and potential for substantial capital gains taxes if sold outright. Giving unimproved property either outright or in trust provides an attractive alternative that benefits both you and the Church or one of its institutions. Philanthropies professionals will be happy to discuss these gift options with you and your team of professional advisors.