Gifts of real estate are generally more complex than gifts of cash or stock, and careful attention must be paid to several technical issues related to IRS regulations, as well as the normal due diligence that would be exercised in a purchase of real estate.
Physical Property Review
Before accepting any gift of real estate, a CMC representative is required to inspect your property to determine whether it can be sold within a reasonable amount of time and to ensure that there are no significant liabilities associated with it.
We ask donors to complete a brief questionnaire describing the property to ensure that we have the necessary details in order to accept a gift of the real estate.
Binding Pre-arranged Sale Not Permitted
While it is not uncommon for a prospective buyer to have expressed an interest in purchasing the property prior to the gift, IRS regulations require that a gift of real estate must occur BEFORE there is a BINDING sale agreement otherwise, the IRS ascribes the sale, and the tax liability, to the donor.
When property subject to a mortgage is transferred to charity, the value of the mortgage is considered debt relief and, under IRS regulations, the amount of the debt relief is taxable as income to the donor.
Planning Solutions There are several options for planning around a mortgage.
Pay off the mortgage prior to making the gift.
Transfer the debt to another property.
Donate a fractional interest in the Property. CMC often uses this approach. The donor retains an interest in the property sufficient to pay off the debt at closing out of the sale proceeds. Additionally, the donor executes a co-tenancy agreement wherein the donor accepts all legal responsibility for any payments related to the mortgage, including any monthly mortgage payments.
If you intend to claim a charitable income tax deduction for your gift of real property, the IRS requires you to obtain an independent, qualified appraisal to determine the property's fair market value. There are a number of requirements the appraisal must meet.
Depending on the type of real estate being considered, the College may require a Phase 1 Environmental Survey. The results of this survey will determine whether further environmental analysis is required.