Giving A Gift Of Real Estate

"I want to support Mississippi State University, but I am unable to make a large cash gift at this time." | "My investment property has appreciated as much as it's going to. I can't afford the capital gains taxes if I sell it now." | "This land has been in my family for generations. I want to ensure that others will benefit from it."

A large number of alumni and friends are interested in contributing to the future success of Mississippi State University. Unfortunately, many of these potential donors often overlook a valuable resource for making that contribution - property.

Statistics show that one-third to one-half of a person's wealth is often held in real estate. Real estate is a valuable asset and a sound investment which can provide the property owner with immeasurable benefits, not the least of which is the pride of simply owning a piece of land. Whether it's a home, timberland or a condo at the beach, most of us own property.

As a property owner, you also know that ownership has its downside. Capital gains tax on the sale of property can be severe, and simply caring for land or property can be a significant strain on both your time and financial resources.

Mississippi State University has developed two programs to help you utilize your real estate in a meaningful way - Bulldog Properties and Bulldog Forest. Both avenues have the benefit of helping MSU students and investing in the betterment of our institution. At a time when less than one-third of MSU's total budget comes from state revenues, private donations are essential to our quest for excellence.

Types Of Property That Can Be Given

"I gave my land to Mississippi State for estate planning – looking to the future for my family and me. I also gave it at this time for the current tax advantages instead of giving at my death when only my estate would benefit." – Col. K.D. Johnson

Timberland Property

Timberland

Agricultural Property

Agricultural Property

Residential Home

Residential Home

Vacation Home

Vacation Home

Commercial Property

Commercial Property

Undeveloped Property

Undeveloped Property

Recreational Property

Recreational Property

Investment Property

Investment Property

Mineral Interests

Mineral Interests

Reasons For Giving Property

"I want to support Mississippi State University, but I am unable to make a large cash gift at this time." | "My investment property has appreciated as much as it's going to. I can't afford the capital gains taxes if I sell it now." | "This land has been in my family for generations. I want to ensure that others will benefit from it."

It's a charitable gift

Giving property is one way that you can benefit Mississippi State University. Just like gifts of cash or securities, gifts of property may be used to benefit any area of the university that you wish — whether it be scholarships, faculty programs, athletics or campus facilities. Your gift can be used to provide an education to a deserving student, to endow a faculty position that will enable Mississippi State to attract premier educators or to enhance a program that will improve student opportunities or beautify the campus. We will listen to your desires and help you find the perfect fit for your gift.

It provides tax benefits

There are many tax benefits associated with gifts of property. If you have owned your home or other real estate for a long time, it has certainly increased in value, and selling it will mean paying capital gains tax on the appreciation. With gifts of property, you may:

  • Avoid capital gains taxes
  • Avoid estate taxes
  • Earn a tax deduction

For a more detailed description of potential tax savings, please read Methods of Giving below.

Property has fully appreciated

Perhaps over the time you have held your property it has fully appreciated. Selling it is not the most desirable option because of the capital gains tax it will incur. By making a gift to Mississippi State, you can resolve this issue while also making a significant investment in the university.

Property has devalued

It may be that property you have held for some time has decreased in value due to changing surroundings or market demand. For example, an older commercial building in a declining neighborhood may be worth as much to you now, in terms of a charitable income tax deduction, as it is likely to be worth in the future. Developed investment or commercial property may provide significant capital gains tax savings when used to make a gift while avoiding potential depreciation recapture. It may also be used to fund a charitable remainder trust paying an income for life. A gift to MSU provides a win-win situation for both parties.

Property value is stunted

Agricultural land tends to return a low percentage of its market value. This is especially true of absentee-owned land, where tenant shares and farm managers' fees often reduce owners' profits. Also, profitability varies depending on the weather and commodity markets. These factors can make agricultural land an ideal charitable gift.

The hassle of selling is avoided

By giving property to the MSU Foundation, you avoid the burden of finding a real estate agent. You will not have to be concerned with preparing the property for sale. Our knowledgeable real estate team will walk you through the giving process no matter how you choose to give.

No more upkeep of property

Maintenance of property, especially when you are not close by, can become cumbersome. By giving it to Mississippi State, you can make a meaningful investment in our faculty and students while avoiding homeowner fees, property taxes, timber maintenance and a host of other issues.

Methods Of Giving

A gift of timberland provides a unique opportunity to see your land preserved while benefiting MSU. | Many types of property can be considered for Bulldog Forest. | Real estate gifts benefit MSU students and enable the university to thrive. | Funds from real estate gifts are used to support the university programs that are of greatest interest to the donor.

Outright Gift

CREATE A LEGACY, RECEIVE A TAX BENEFIT

When you make an outright gift of real property held for more than a year, you obtain an income tax charitable deduction equal to the property's full fair market value. This deduction lets you reduce the cost of making the gift and frees cash that otherwise would have been used to pay taxes.

By donating the property to Mississippi State, you also avoid capital gains tax on the property's appreciation. Furthermore, the transfer isn't subject to the gift tax, and your donation reduces your taxable income.

Example: Mary gives the MSU Foundation a vacation property she no longer uses. It originally cost $50,000 but is now worth $150,000. She gets a $150,000 charitable deduction, which represents a tax savings of 42,000 in her 28 percent tax bracket. She completely avoids tax on the $100,000 of appreciation. Now, Mary no longer has to maintain the cottage, and the property won't be taxable in her estate.

Your deduction for a gift of appreciated real estate in any year is generally limited to 30 percent of your adjusted gross income (AGI), with a five-year carryover of the unused deduction. If you elect to base your charitable deduction on the cost of the property, this raises your AGI limitation to 50 percent with a five-year carryover and has implications for all gifts made during or carried over to that year.

For real estate that has been held only short term (a year or less), your charitable deduction is limited to the property's cost basis, but there is still no tax on the appreciation. The deduction may be claimed up to 50 percent of your adjusted gross income, with a five-year carryover for any excess value.

Your gift is usually effective when a properly executed deed (suitable for recording under state law) is delivered to the MSU Foundation. The amount of your deduction for a gift of real estate (if more than $5,000) must be substantiated by a qualified appraisal of its fair market value.

Charitable Remainder Trust

OBTAIN A LIFE INCOME FROM YOUR GIFT

Instead of making an outright gift of real property or establishing a retained life estate, you can use unmortgaged property to fund a qualified charitable remainder trust. Once the property has been transferred to the trust, the trustee can then sell it and invest the proceeds in income-producing securities. These investments can provide income payments to you and any other recipient you name for either a lifetime or term of years. When the trust terminates, Mississippi State will receive the remainder in the trust. This strategy avoids estate taxes when spouses are the only income beneficiaries.

You can also benefit from a substantial current income tax deduction. The amount of the deduction is determined by the age of the income beneficiaries when the trust is created, the value of the trust assets and the annual percentage or amount to be paid to the income beneficiaries. When you transfer appreciated property, you will not pay any tax on the capital gain.

Example: Sam and Mary, both age 75, establish a charitable remainder trust with real property worth $250,000. The trustee sells the land, invests the proceeds and pays Sam and Mary 5 percent of the trust's value whether the value increases or decreases. They are eligible for an immediate income tax deduction of $124,948; plus the home's value is removed from their taxable income.

Bequest

GIVING REAL ESTATE THROUGH YOUR WILL

If making an irrevocable lifetime gift of property through one of the other options discussed does not meet your needs, consider giving it in your will. Because your will is revocable (that is, you can change your mind at any time), you will not be able to take an income tax deduction, but the property will not be taxed as part of your estate. Through your will, you may also give another person lifetime use before unrestricted ownership passes to Mississippi State. You may also bequeath full title to an individual if that person survives you with Mississippi State as the contingent recipient.

If you don't need to make a new will now for any other reason, ask your attorney to draw up a brief codicil for this purpose. A codicil is an easily prepared and inexpensive supplement or additional provision. We encourage you to notify the MSU Foundation if you plan to make a gift in your will.

Retained Life Estate

GIVE YOUR HOME, BUT ENJOY LIFETIME USE

Let's assume you like the tax advantages a charitable gift of real estate would offer, but want to continue living in your personal residence for your lifetime. You would like to retain the right to rent your house or make improvements. You may also want a survivor (perhaps your spouse) to enjoy life occupancy, but ultimately, you would like Mississippi State to receive the property.

By deeding your home to us now, subject to all these rights, you can still obtain valuable tax savings. This arrangement is called a retained life estate. Even though the MSU Foundation would not take possession of the residence until after the lifetimes of the tenants you've named, you receive an immediate income tax charitable deduction because the gift cannot be revoked. The amount of the deduction depends upon the value of the property, your age and the age of any other person given lifetime use of the property.

Example: Greg, age 70, and his wife, Amanda, age 69, give the MSU Foundation the remainder interest in their home, which is currently worth $200,000. They retain a life estate for their lifetimes. After both have passed away, the MSU Foundation receives the home. Greg and Amanda are eligible for an income tax deduction of $68,848 in the year they establish the life estate. Plus, this gift removes the full $200,000 value from their federal estate.

With this kind of gift, you retain all the rights and responsibilities of ownership such as maintenance, taxes, improvements and insurance – other than disposing of the property after your death. In other words, you may continue to live as you have with no interference. You may even decide to move out temporarily or permanently. Should you rent your home, all of the rent belongs to you.

Creating a Charitable Gift Annuity

MAKE YOUR LAND OR TIMBER WORK FOR YOU

To create a charitable gift annuity through a gift of land or timber, the donor transfers assets to the MSU Foundation in exchange for a contract to pay him or her, and/or another beneficiary. The donor receives an immediate income tax deduction and may receive a portion of each annuity payment free of income tax.

Summary

For many of us, our property is very personal. We respect and care for it, and it provides for us. A gift of real estate to Mississippi State broadens that mutual care by including others who can benefit. Students, faculty and the very institution itself can all have their lives enhanced in meaningful ways by your charitable donation. It is a remarkable way to begin a legacy.


OUTRIGHT GIFT BEQUEST RETAINED LIFE ESTATE CHARITABLE REMAINDER TRUST CHARITABLE GIFT ANNUITY
YOUR GOAL Make a current gift and maximize the charitable income tax deduction Defer a gift until after your lifetime Give your residence or property now, but continue to live there Secure income for a lifetime or a term of years Receive lifetime income
HOW TO MAKE YOUR GIFT Deed your property to the MSU Foundation Name the MSU Foundation in your will or living trust Deed your property to the MSU Foundation, but retain occupancy and use Create a trust that generates payments; the remainder benefits MSU Fund an annuity with the MSU Foundation through the sale of land or timber
YOUR BENEFITS
  • Immediate charitable income tax deduction
  • Eliminate capital gains tax
  • Eliminate the burdens of property ownership
  • Reduce your estate tax liability
  • Lifelong control of your assets
  • Easy to create
  • Immediate charitable income tax deduction
  • Lifetime use of your residence or farm
  • Reduce your estate tax liability
  • Immediate charitable income tax deduction
  • Avoid up-front capital gains tax
  • Payments for life or a term of years
  • Eliminate the burden of property ownership
  • Partial income tax deduction
  • Receive lifetime income
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