Doing Good with Real Estate...
Posted at 1:14 PM, Jul. 11, 2006
John Rummage visits with Gabrielle, a little girl at the Philip Hayden Foundaton, Langfang Village, China.
The average property owner and investor might not be aware of all the positive tax options available to them when they decide to sell their real estate. Did you know that you get the biggest tax break at the current year income tax level and in the future at the estate tax level by being like Warren Buffet and giving your property away? You might even create a bigger cash flow by giving the property to a 501 (c) 3 non-government (non-profit) organization than you could create by selling your property outright, but you need tax advice from a knowledgeable tax professional to calculate your cash flow for you.
You can give your property away during your lifetime, like Mr. Buffet did, or at death through your Last Will and Testament, through a Trust or by setting up a Testamentary Gift. You can also give your property away, but retain a Life Estate in the property. A Life Estate gives you possession of the property and a tax deduction. Your tax deduction takes into account the value of your life estate and may be less than if you gave up all rights to the property.
You can sell your property through a bargain sale with a leaseback in conjunction with a 501 (c) 3 non-profit organization and realize positive tax benefits. In this transaction, you negotiate a sales price less than the appraised value. The difference between the sales price to the non-government organization and the appraised value becomes your tax deduction. You get cash; a tax deduction and you can lease your property back at a fair market lease value. Again, you may be able to create a bigger cash flow by selling at a price below fair market value (a bargain sale) because of the tax deduction, than if you sold your property at it’s appraised value. You need the help of a tax professional to make those calculations for you.
When you choose to create a property transaction with a 501 (c) 3 non-government organization you are actually redirecting some of your tax money that would normally go to Washington to a non-profit organization whose purpose is to help solve social problems. It is important for you to find an organization that is willing to do these transactions, but more importantly does a work that you would want to support. The newspapers are full of information about the Buffet transaction, and that newsworthy information translates into good news for all of us. When you combine a purposeful gift with professional tax planning every party to the transaction is a winner. You and your family are winners, the beneficiaries of the non-government organization are winners and America and the world at large are winners. If you do nothing but pay your taxes the only winner is Washington and their programs, which you have little to no control over. By entering into a transaction with a non-government organization you can interface with the people running the non-government organization and make suggestions as to where and how they apply your gift to a need that you and the organization consider important.
My wife and I are both REALTORS® who understand these property transactions. We are also two of the founders of Founding Family Charitable Foundation, a 501c3 non-profit corporation which helps American families by providing financial grants to adopt orphans around the world. That was our foundation’s initial mission, but over time our mission has grown to include providing food, clothing, shelter, education and medical assistance for orphans anywhere around the world where there is legitimate need. Founding Family is currently helping children in America, China, India and Israel.
If you feel comfortable redirecting some of your tax dollars from Washington to helping children and possibly even reducing your capital gains taxes, please contact us by sending an email message to either John or Sarah. Contacting us might be the best thing you ever did for yourself and the children that entered this world with great potential, yet, also in great need.
The following is a list of property transactions that some non-government organizations will help arrange for owners of property.
If you DO need income, or to own or to live in your property:
Testamentary Gifts
Reserve Life Estate
Sale with a Lease Back
Fair Market Sale with a Gift
Bargain Sale
Option to Purchase
If you DO NOT need income, to own, or to live in your property:
Outright Donation
Donation by Will, or Trust
Donation with a Reserved Life income Option for Heirs
Donation with a Lease Back
Donation by Undivided Partial Interest
Installment Sale or Installment Bargain Sale
Donation to establish a Life Income
“Do not go where the path may lead, go instead where there is no path and leave a trail.” Ralph Waldo Emerson
This information is for educational purposes only, and should be verified by your financial professional.
--John Rummage, 615-620-4372
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