Land. Since the earliest days of our country, land has been recognized as one of the assets central to the American Dream. From a quest for wide-open spaces, to the highest levels of sophistication in development, leveraging land for the best possible value is a practice with which Americans are very familiar.
With the right plan, mountains are moved, and dreams are realized. However, it is not at all unusual for a family’s portfolio to contain appreciated land acquired a number of years ago during an asset accumulation period. And while the land represents a valuable asset on the balance sheet, it may be producing little or no return in real dollars.
In cases like this, sometimes the obstacle to realizing dreams is the land itself; finding a way to move the property can be easier said than done. Selling the land outright will trigger a capital gains tax on the appreciated value. So, in the case of a piece of land that was acquired for $20,000, and is worth $200,000 today, the tax bite could potentially be more than $27,000.
Leveraging The Full Value
Friends of organizations like the Foundation for Community Care have discovered that some aspects of charitable tax planning provide tools that make it possible to leverage the role the land plays in a family’s portfolio.
Rather than selling the land and incurring significant shrinkage due to the capital gains tax, it is possible to:
bypass the capital gains tax;
receive a charitable income tax deduction based on the full fair market value; and
make a significant gift to charity of the land.
Since a qualified charity like the Foundation for Community Care is able to sell the land without tax consequences, the full $200,000 can go to work realizing your philanthropic objectives. Our tax laws reward your generosity with a significant reduction in the taxes you owe. A very nice way to use the tools available for maximum leverage!
There are a number of issues that should be considered, of course. The above example assumes there are no mortgages or liens on the property, that the property is free of environmental issues, and that there has not been a previously arranged sale. At times, other issues can have an impact on the ultimate value; however, for individuals and families possessing a strong philanthropic spirit, this is often an attractive planning option.
Variations on the plan discussed here even make it possible to give a portion of the property, engage in a joint sale of the property with charity, and generate personal revenue from the sale.
If you’d like to explore this plan, or other ideas that leverage your assets and your charitable intent, you’re invited to contact our office at 406-488-2273 or email [email protected]. Our staff is pleased to be able to offer this information as an educational service, without cost or obligation.
(This information is provided as an educational service without cost or obligation. Individuals and families should consult personal professional advisors when considering charitable planning options.)
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