Don’t Leave Real Estate Donations for Others to Do

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

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

Individuals:

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.

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.

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:

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:

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.

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.

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Bargain Sale Real Estate Transaction Could Be a Quick Way to Sell Your Commercial or Retail Property

The world of commercial real estate is one of peaks and valleys. Selling conditions are subject to change quickly, and because of the nature of the potential uses for a property the contracts and negotiations can get pretty complicated. With the right professionals in your corner and a little know-how you can navigate the world of commercial real estate efficiently and come out on the other side with financial gain. And this doesn’t always involve the most traditional approaches.

Conventional wisdom would tell a seller of commercial real estate that they should play by the same handbook that other commercial property owners have been using for decades. You need to find a qualified and competent real estate agent, a knowledgeable attorney who is experienced in commercial real estate transactions and closings, and then begin the rigorous task of prepping and primping your property for showing on the market. This method is certainly tried and true and the advice is sound, however today’s real estate market sometimes requires a bit more creativity and a break from the norm.

Particularly if your property is distressed or underutilized using the traditional method of selling can be a challenge and can prove to be a long process. This type of property often has a hard time competing with optimally maintained and high-performing properties on the market, which usually means that you’ll need a rock-bottom asking price to entice potential buyers. And if that buyer should smell blood in the water (i.e. hemorrhaging from your bank account in the form of carrying costs) your negotiating position could become compromised. By exploring creative alternatives you can cut out the time factor and ensure yourself a buyer who is ready, willing and able.

A bargain sale real estate transaction could be your answer to selling your commercial, industrial or retail property quickly. A bargain sale is a transaction with a qualified non-profit organization where you get a small amount of cash, usually to cover the cost of the appraiser as well as some closing costs, and a significant cash benefit in the form of a tax deduction donation that can significantly reduce the amount of taxes you pay over a period of time.

A bargain sale is not a transaction that happens occasionally. In fact, over 20,000 bargain sale real estate transactions occur every year in the U.S. changing the lives of people around the world and the communities in which the property is located. The charitable organization uses the real estate asset to fund its mission and you are able to dispose of your distressed or underutilized assets quicker and with less hassle than you thought possible.

To get the highest value for your commercial, industrial or retail property, you should work with a non-profit that is experienced in bargain sale real estate transactions. Charitable organizations that are experienced in bargain sales will make an offer quickly if it meets their criteria and will work with the appraiser to complete the process under the IRS bargain sale guidelines than can be found in IRS Publications 561 and 526.

The IRS appraisal guidelines allow for a more liberal appraisal than you will find in a quick sale bank appraisal because it is based on the fact that the buyer and seller are not under a distressed situation and “are not under any compulsion to buy or sell”. They also allow a weighted approach to the bargain sale appraisal utilizing the sales comp, income analysis and replacement cost approach when determining the bargain sale value.