Part Gift and Part Sale

Susan and Kevin bought a vacant lot along Lake Anna several years ago. They had planned to build a second home so that their family could spend summers along the lake. However, as time went on, Kevin's job kept him in town and the children grew up before Susan and Kevin had the financial resources to build on the land.

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 Boys Home.

Kevin: I first was exposed to the idea when a guy from Boys Home came to our church and made a presentation on charitable gifts. After the presentation, I had the opportunity to talk with him about our situation. 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: That is what we decided to do. By giving Boys Home 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 Boys Home received $125,000, a very nice gift that we feel wonderful about. The work they do with young boys is so critically important today and we are glad we can give them a substantial boost. I never thought we would be able to do something like this.

*Please note: The names and image above are representative of a typical donor and may or may not be an actual donor to our organization.