In many regions of the country, owning real estate has been a wonderful long-term investment. But if your farm, second or vacation home, undeveloped land, or commercial site has lost its usefulness or has become expensive or cumbersome to maintain, consider using it to support the school or program of your choice at the University of Virginia.
The financial and personal benefits are numerous in that you:
If you give your real estate outright to the University, you will be eligible for a charitable income tax deduction based on the full fair-market value of the real estate you give. You will avoid the capital gains tax you would have had to pay if you had sold the property, and you will have made a generous gift to the University school or program your choose to support. Print and fill out the Real Estate Donation Worksheet to start the process.
On a case-by-case basis, a gift of a fractional interest in real estate may be possible. You will be eligible for a charitable income tax deduction equal to the appraised value of the interest you transfer.
Example: An Outright Gift
Sam wants to make a gift to support the University. The undeveloped land he bought several years ago for $10,000 was recently appraised for $100,000.
If Sam sells the land, he will owe $13,500 in capital gains tax and pay the expenses of sale, but if he donates the land, he will not recognize any capital gain, will be eligible for an income tax deduction for the land’s full $100,000 fair-market value, and will have removed the value of the property from his estate. Most importantly, Sam will have established a legacy of support to his designated school or program at the University.
Real estate can also be used to provide a generous gift to the University and a reliable payment stream to you and/or a designated beneficiary for life.
If you contribute real estate to a special kind of charitable trust known as a “Flip” Charitable Remainder Unitrust (“Flip” CRUT), you will be eligible for an immediate income tax deduction at the time of your contribution. Until the trust sells the real estate, you or your designated beneficiary will receive annual payments consisting of the trust’s net income. Once the real estate is sold, the annual “unitrust” payments for the remainder of the trust term will consist of a fixed percentage of the total trust value each year.
At the end of the trust term, the remaining trust assets will pass to the University to be used for the purposes you designate. You will also have removed the assets from your estate, eliminating any estate tax that may otherwise be due.
In some circumstances, real estate may also be used to fund a charitable gift annuity to benefit the University. In contrast to a “Flip” CRUT, gift annuity payments are fixed at the time of your contribution and are contractual.
Example: A Charitable Remainder Trust
The land Joyce purchased 10 years ago for $10,000 recently appraised for $500,000. Now 60 years old and ready to retire, Joyce wants to supplement her income. If she sells the property, she will have to pay $73,500 in capital gains tax plus realtor fees and other expenses.
Instead, Joyce transfers her land to a 6% “Flip” CRUT, making her eligible to claim an immediate income tax charitable deduction of $171,105 and entitling her to immediate net income distributions from the trust. When the land is sold, Joyce will begin receiving an annual 6% “unitrust” payment each year. At Joyce’s death, the remaining assets in the trust will be distributed to the University for the purposes she designated.
If you want to receive a current income tax deduction for the gift of your home, but would like to continue living there for the rest of your life, you could give the University a “remainder interest” in your home and retain a “life estate” for yourself. You will be eligible for a current income tax deduction based on the value of the remainder interest you have given, and you will have the right to live in your home for the rest of your life.
A bequest of real estate through your will or living trust will not be subject to estate taxes and will establish your legacy at the University school or program you select. We encourage you to let us know of your intentions when you name the University as the beneficiary of the real estate in your will or living trust. Communicating your plans ensures that your philanthropic goals are met.
I bequeath to The Rector and Visitors of the University of Virginia, a Virginia public corporation located in Charlottesville, Virginia, [property described herein] to be used by the University in its discretion for its general purposes.
The University of Virginia does not provide legal, tax or financial advice. We strongly recommend that you consult professional advisors on all legal, tax or financial matters, including gift planning considerations. To ensure compliance with certain IRS requirements, we disclose to you that this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding tax-related penalties.