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Part Gift and Part Sale

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

Sol: Over the years, that lot increased in value. It now is worth much more than what we paid for it. We paid about $40,000 for the lakeside property and it is now worth almost $200,000.

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 wanted to sell, but we also wanted to avoid paying so much in tax on the sale. We were thinking of making a gift of 25% of the property to our favorite charity.

Sol: I happened to be talking to a CPA at a luncheon at our Jewish Federation. 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 our tax advisor, we discovered that if we gave a 25% interest in the property to Federation, we would receive two benefits. We would get an income tax deduction for the value of our gift plus save on capital gains tax on the 25% interest given away.

Susan: That is what we decided to do. By giving charity a 25% interest in the property prior to the sale, we saved the capital gains tax on that part. The deduction on that part offset a large portion of the tax on the $150,000 we received when the property actually sold. We are very pleased with the "double benefit" from giving the property, and Federation received $50,000, a very nice gift. At our request, our local Federation will add our gift to its Jewish Campership Endowment Fund to provide financial assistance to school-age children to attend Jewish camps. That is a matter that is near and dear to us. Sol and I met at a Jewish camp, and our kids made lasting friendships at Jewish camp. We are thrilled to help young Jews to attend, as we and our kids were privileged to do.

*Please note: The names and image above are representative of typical donors and may or may not be actual donors to The Jewish Federations of North America, a Jewish Federation or a Jewish Community Foundation. Since your benefits under federal rules may be different from this couple, you may want to click here to view a color example of your benefits.

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Any tax consequences described on this page are based on U.S. federal tax law. Charitable deductions from state and local taxes or from Canadian and provincial taxes may not be available to the same extent as from U.S. federal taxes. The Jewish Federations of North America (JFNA) does not provide legal advice. Donors are encouraged to seek independent tax and legal counsel. You may read JFNA's charitable solicitation disclosure statement here and important information about endowment gifts and bequests to JFNA here.