Charitable Gifts of Partial Interests in Property
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Charitable Gifts of Partial Interests in Property

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These slides are taken from the graduate financial planning course "Introduction to Charitable Planning" at Texas Tech University. Details at www.EncourageGenerosity.com

These slides are taken from the graduate financial planning course "Introduction to Charitable Planning" at Texas Tech University. Details at www.EncourageGenerosity.com

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Charitable Gifts of Partial Interests in Property Charitable Gifts of Partial Interests in Property Presentation Transcript

  • All slides are taken from this book which includes detailed explanations of all concepts. Available from Amazon.com Full color version available at www.createspace.com/4707238
  • What is it? When a donor gives some rights to property but keeps others
  • Charity I give you this car, but I keep the right to use it for 1 year. Can I deduct current value less 1 year of depreciation?
  • I can’t seem to rent out my office building, so I’ll donate its use to charity for a year. Can I deduct?
  • I give the charity my land, but I keep all rights to extract minerals
  • Normally, donor can’t keep some rights and deduct a partial interest gift
  • Charity I give you this car, but I keep the right to use it for 1 year. No deduction if any ownership rights are retained.
  • No deduction if any ownership rights are retained (I still own rental property)
  • No deduction if ownership rights are retained (I own minerals)
  • Normally, donor can’t keep some rights and deduct a partial interest gift
  • If I could take the deduction now, what would be left for the charity in 1 year? I give charity this car, but keep the right to use it for 1 year.
  • I give charity the right to use my newly planted olive tree orchard for 7 years. Olive trees don’t produce for the first seven years
  • Charity I give you my $2,000,000 company, but keep the right to buy it back in 3 years for $2,000,000. [Can I deduct $2,000,000?] Our only product is a new cancer drug that will be approved or rejected by the FDA in 3 years
  • Normally, donor can’t keep some rights and deduct a partial interest gift
  • The donor can deduct if he gives all or an “undivided portion” of his interest Other Exceptions • Remainder interest in a home or farm • Charitable remainder/ lead trust or pooled income fund • Qualified conservation easement
  • I can’t cheat the charity by making my share more valuable if (1) I give away everything I own or (2) I own exactly the same rights as the charity – just a different percentage
  • Divided share v. undivided share Rights to walnuts from specific tree branches Divided Share A 15% ownership interest in the whole tree Undivided Share My Ownership Rights My Gift A walnut tree
  • Rights to walnuts from specific tree branches Divided Share A 15% ownership interest in the whole tree Undivided Share My Ownership Rights My Gift A walnut tree A divided share is not deductible
  • Rights to walnuts from specific tree branches Divided Share A 15% ownership interest in the whole tree Undivided Share My Ownership Rights My Gift A walnut tree An undivided share of property is deductible
  • Divided Share Undivided Share I donate a West Texas cotton farm, but keep all the mineral rights A 15% ownership interest in the whole tree Rights to walnuts from specific tree branches Divided or undivided share?
  • Divided Share Undivided Share I donate a West Texas cotton farm, but keep all the mineral rights A 15% ownership interest in the whole tree Rights to walnuts from specific tree branches Not Deductible
  • Divided Share Undivided Share I donate a 5% interest as tenants in common in a West Texas cotton farm including all the mineral rights A 15% ownership interest in the whole tree Rights to walnuts from specific tree branches Divided or undivided share?
  • Divided Share Undivided Share I donate a 5% interest as tenants in common in a West Texas cotton farm including all the mineral rights A 15% ownership interest in the whole tree Rights to walnuts from specific tree branches Deductible
  • Divided Share Undivided Share I donate a painting, but keep all digital and reproduction rights A 15% ownership interest in the whole tree Rights to walnuts from specific tree branches Divided or undivided share?
  • Divided Share Undivided Share I donate a painting, but keep all digital and reproduction rights A 15% ownership interest in the whole tree Rights to walnuts from specific tree branches Not Deductible
  • Divided Share Undivided Share I donate a 1/12 ownership interest in a painting including the right to possess 1 month of every year A 15% ownership interest in the whole tree Rights to walnuts from specific tree branches Divided or undivided share?
  • Divided Share Undivided Share I donate a 1/12 ownership interest in a painting including the right to possess 1 month of every year A 15% ownership interest in the whole tree Rights to walnuts from specific tree branches Deductible, if…
  • Fractional shares in tangible personal property • Deduction is lesser of value during first or later transfers • All of the donor’s rights must be given to charity within 10 years (or at donor’s death if earlier)
  • What happens if I don’t transfer the rest of it to charity within 10 years?
  • Recapture Previous deductions are counted as ordinary income, plus interest, plus a 10% penalty
  • Rights to walnuts from specific tree branches Divided Share A 15% ownership interest in the whole tree Undivided Share My Ownership Rights My Gift A walnut tree When can I deduct a gift of partial rights?
  • I can deduct a gift of all or an undivided share of all my rights even if I own only a partial interest All of donor’s interests Undivided share of donor’s interests 15% ownership in my rights Rights to walnuts from specific tree branches My Ownership Rights My Gift Rights to walnuts from specific tree branches
  • I give my land to a charity although I never owned the mineral rights
  • All of donor’s interests Undivided share of donor’s interests 5% ownership in my rights My Ownership Rights My Gift Rights to walnuts from specific tree branches I give my land to a charity, although I never owned the mineral rights
  • I give a 5% interest as tenants in common in my land to a charity although I never owned the mineral rights
  • All of donor’s interests Undivided share of donor’s interests 5% ownership in my rights My Ownership Rights My Gift Rights to walnuts from specific tree branches I give a 5% interest as tenants in common in my land to a charity, although I never owned the mineral rights
  • Next I give 11/12 interest in my life estate, keeping the right to use every September Deductible as gift of remainder interest in home Deductible as an undivided share of all the interests owned by the donor I give charity the right to own my vacation home after I die by a remainder deed Rev. Rul. 75-420; 1975-2 C.B. 78
  • All of donor’s interests Undivided share of donor’s interests 11/12 ownership in my rights My Ownership Rights My Gift Rights to walnuts from specific tree branches I own only a life estate (right to use for life). I give 11/12 of it to charity.
  • If all interests are given to charity, each divided portion is deductible To: The Salvation Army To: The Red Cross To: Texas Tech University
  • Summary If you don’t give or share all of your rights, you get no deduction (unless it is a designated exception)
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  • This slide set is from the curriculum for the Graduate Certificate in Charitable Financial Planning at Texas Tech University, home to the nation’s largest graduate program in personal financial planning. To find out more about the online Graduate Certificate in Charitable Financial Planning go to www.EncourageGenerosity.com To find out more about the M.S. or Ph.D. in personal financial planning at Texas Tech University, go to www.depts.ttu.edu/pfp/ Graduate Studies in Charitable Financial Planning at Texas Tech University