Part Gift and Part Sale
Kevin: Over the years, that lot increased in value. We paid about $40,000 for the property, and it is now worth almost $500,000.
Susan: The lot has gone up greatly in value, and with the children out of the house, we were thinking of selling the property. We want to avoid paying so much tax on the sale. We were thinking of making a gift of 25% of the property to Phoenix Theatre.
Kevin: I happened to be talking to a CPA at the Artistic Director's Series. He mentioned that we could probably give about twice as much with almost the same cost if we gave 25% of the property (prior to the sale) rather than writing a check after the sale.
After talking to their tax advisor, Kevin and Susan discovered that if they gave a 25% interest in the property to charity, they would receive two benefits. First, they would receive an income tax deduction for the value of the gift. Second, they could avoid capital gains tax on the portion of the property that they gave to charity.Susan: The lot has gone up greatly in value, and with the children out of the house, we were thinking of selling the property. We want to avoid paying so much tax on the sale. We were thinking of making a gift of 25% of the property to Phoenix Theatre.
Kevin: I happened to be talking to a CPA at the Artistic Director's Series. He mentioned that we could probably give about twice as much with almost the same cost if we gave 25% of the property (prior to the sale) rather than writing a check after the sale.
Susan: That is what we decided to do. By giving Phoenix Theatre a 25% interest in the property prior to the sale, we saved the capital gains tax on that part. The deduction offset a large portion of the tax on the $375,000 we received when the property actually sold. We are very pleased with the "double benefit" from giving the property, and Phoenix Theatre received $125,000, a very nice gift.