Donating Real Estate

When It Makes Sense for Both Donor and Foundation

It is often assumed that donations of real estate to private foundations aren’t ideal because charitable deductions for such donations are typically limited to the lesser of the donor’s cost basis and the fair market value. And donations of real estate are often dismissed out of hand regardless of whether the property has depreciated or appreciated in value.

[callout]Important factors to consider include the donor’s basis in the property, the property’s fair market value, and whether the donation might be a component of an estate plan.[/callout]

If a property has significantly depreciated in value below its original purchase price, donating it directly to the foundation isn’t recommended because the donor would lose the ability to realize the capital loss. Instead, donors typically are advised to sell the property and then contribute the proceeds. Even a donation of highly appreciated real estate typically is not recommended, as the donor would only be able to claim a cost basis deduction. Yet, despite the impediments that would seem to auger against donating real estate to a private foundation, there are circumstances in which these donations do make sense, both for the foundation and the donor.

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