Wednesday, 16 January 2013

Sell or Donate? What are the Tax Benefits of Donating Real Estate To A Church Or Charity?


KEY Selling your home requires a lot of marketing and the online market place can be just the advantage you need when selling real estate to make sure your home is exposed to the largest number of people possible. Besides offering the basic information about your house, you can also offer a virtual tour to entice qualified buyers.

Most people think that donating real estate to a charity is for the rich. This simply is not true. I have worked with individuals, charities, and small corporations for years with the donations process. For many people and companies is about the able to rid themselves of unwanted property. They simply want out. They are tired of property taxes, insurance costs and the liability exposure.

The following are the rules that apply for real estate donation:

Individuals:

KEY Open the door to high tech solutions when selling real estate. One of the newest methods of selling real estate is by installing a low cost FM transmitter.

The following rules apply if the donated property is owned in your own name, with your spouse or other persons: If you have held the property for more than one year, it is classified as long-term capital gain property. You can deduct the full fair market value of the donated property. Your charitable contribution deduction is limited to thirty percent (30.00%) of your adjusted gross income.

KEY K

Excess contribution value may be carried forward for up to five years. If the property has been depreciated, the fair market value must be reduced by its accumulated depreciation through the date of contribution. Fair market value is most commonly determined by an independent appraisal.

KEY If you are taking on a venture in selling real estate for others, make sure that you avoid homes in areas that have a large presence of sex offenders. These days, everyone is checking a great variety of resources in order to determine whether they are around sex offenders, especially if there are children in the home.

If you elect to deduct your cost basis of the donated property you are allowed a deduction of fifty percent (50.00%) of your adjusted gross income. Excesses here again can be carried forward up to five years. Which method you elect is dependent on the cost basis in the property donated, your tax bracket, the age and health of the donor and whether you plan to make future contributions. Corporate Donors

The following rules apply if a corporation makes your contribution, these rules apply:

KEY Having a plan in place before selling real estate can save you time and money in the long run. It is a good idea to write your plan down before you sell so that you will be fully prepared for the experience.

If you have a controlling interest in the corporation and the property has been held for more than one year, the corporation can deduct up to ten percent (10.00%) of the net profit of the corporation. Excess contribution amounts can be carried forward up to five years. The fair market value here must be reduced by the amount of accumulate depreciation. If the corporate has elected "Subchapter S" status, then the contribution allowed will be reported on the individual shareholders K1 and may be deducted on the individual return. Partnerships, S-Corporations and Limited Liability Companies

The following rules apply if a partnership, S-Corporation or limited liability company is making your contribution:

KEY If you are buying and selling real estate as an investment or a business, remember that there will always be another investment property. Do not allow yourself to become emotionally attached to any of your properties, as this will interefere with your ability to make hard business decisions or deal with having a purchase fall through.

The corporation may not claim a deduction for the property donated. Rather, the contribution passes to the individual shareholders on a pro-rated based on their percent ownership in the S corporation. The shareholder can claim this deduction on their individual tax return. The same limits and carry forward rules will apply.

KEY To make money selling real estate, you have to start by purchasing it in the right location. A neighborhood that is stable or improving, will generally be a good area to attract buyers down the road when it is time to sell.

Partnerships and limited liability company contribution rules are the same as an S corporation with one exception the partners or member can claim a deduction even if they have no basis in the partnership or limited liability company.


Real estate investing by nature is risky. You can win, lose, or break even. We cannot guarantee a profit or loss. We do not provide legal, accounting, or contracting advice.

* Please consult your CPA/Attorney for your specific tax benefit.

Ralph Mark Maupin has purchased and sold in excess of 3,500 single-family homes and many multi family properties. Mark teaches real estate investing seminars, and has real estate mentoring program.


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