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Gifts of Real Estate to SOHO

By Barry E. Hager

Looking for ways to reduce your taxes and support the cause of historic preservation? Consider a gift of real estate to SOHO.

Real estate, such as residential or commercial property, vacation homes, farms or even vacant land can be donated to SOHO. There are many ways to donate real property to SOHO and realize valuable tax benefits, often during the same year the gift is made. A gift of appreciated real estate to SOHO includes several advantages to the donor. Here are some ways to make gifts and realize tax benefits:

(1) Present Gifts of Real Property
By making a present gift of real property to SOHO, the donor can take advantage of an immediate charitable donation deduction for the full fair market value of the property donated. For appreciated property, which will include almost any property held by the donor for some period of time, the donor will avoid any capital gains tax on the property, while still receiving the donation deduction for the full value of the property, up to 30% of adjusted gross income of the donor for the year of the donation. This can be a powerful tax savings tool for individuals in higher income brackets. For income producing property, the donor can avoid recapture of depreciation which usually occurs during a traditional sales transaction. Gifts can be made of the entire property or of an undivided interest in less than 100% of the property, where the donor retains some percentage of the property.

(2) Deferred Gifts of Real Property
Another type of gift to consider is a "deferred" present gift, where the donor grants a remainder interest in real property to SOHO, still obtaining a deduction, but retaining a "life estate" interest in the property. This will allow the donor or a family member to continue living in or using the property until the death of the individual holding the life estate interest.

(3) Bequests in Wills and Trusts
Yet another way to give real estate to SOHO is by way of a bequests in wills or revocable trusts, which are probably the simplest and most familiar form of planned giving. A bequest in a will or trust will not tie up the asset during the lifetime of the donor, but will also not result in immediate tax savings. However, gifts of real estate to SOHO made by way of wills or trusts are not subject to estate taxes, and thus can reduce the donor's estate tax liability.

You may wish to seek the advice of your estate planning attorney or tax professional before choosing which type of gift works best for you.

2004 - Volume 35, Issue 2


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