Case Study #1
An investor owned a property for more than 30 years and, due to continued depreciation and increases in the property’s value, was facing a significant capital gains tax obligation upon sale of the property.
During most of this period the property was fully occupied and had an appraised value of $2,100,000. The property went vacant for five years and the investor attempted to sell it for $1,100,000. While vacant, the investor was obligated to cover payments on a mortgage of $350,000, plus payments for property taxes, insurance, maintenance and utilities. After a two-year selling period, no buyers were in sight at the seller’s expected price.
Realty Gift Fund entered into a negotiation with the seller for a Bargain Sale, and the seller obtained a Qualified Appraisal of $900,000. Realty Gift Fund agreed to pay $350,000 in cash and to accept a charitable contribution for $550,000. The cash payment was used to retire the seller’s mortgage so the property could be conveyed to RGF on a free and clear basis.
RGF listed the property for $900,000 but is always constrained from long-term ownership and was able to recognize unique market conditions to achieve a sale in a diligent time frame. A buyer was located who desired to open a restaurant and planned to demolish the improvements to accommodate a land design required by entitling authorities. A price was negotiated to accommodate the buyer’s plan, and the sale provided RGF excess cash funds as a major gift.
Realty Gift Fund
- For the Donor - Fulfillment of his charitable intent, benefits of a charitable deduction, and relief from the debt service, increasing maintenance, and holding costs of a vacant property.
- For the Buyer - A realistic price to acquire a property that needed to be demolished, re-designed, re-entitled, and re-built.
- For the RGF - The benefit of a gift of real estate with managed risk, and to convert real estate into excess cash to further the charity’s mission.