Definition
An appreciated real property and securities gift refers to a donation made by a donor of a property or security asset that has increased in value since its acquisition. When a donor gives assets that have appreciated in value, they can often do so without having to pay capital gains tax on the appreciation. This type of gift is often beneficial for charities because it allows them to receive valuable assets without the burden of taxation. Donors benefit from making such gifts as they can deduct the fair market value of the gift from their income taxes, subject to limits based on their adjusted gross income. The process typically involves evaluating the asset's current market value, ensuring compliance with IRS guidelines (in the U.S.) or CRA regulations (in Canada), and possibly involving an appraisal for non-standard properties or securities. These gifts are particularly important for nonprofits seeking to diversify their funding sources and engage with affluent donors who may have significant assets to give.
FAQ
Qualified properties typically include residential, commercial, or industrial real estate that has increased in value. However, it’s important to ensure that the gift complies with IRS rules or CRA regulations regarding capital gains and property donation.
Organizations should actively promote the benefits of donating appreciated securities, such as immediate tax advantages for donors, and potentially more significant donations than cash. They can also create specialized campaigns targeting affluent donors who hold these securities.
The process generally involves contacting the nonprofit, completing any required valuation/appraisal, submitting necessary documents, and receiving confirmation of the gift for tax purposes. Donors are also advised to consult with tax advisors to ensure compliance with all regulations.
Common Misperception
Myth
A common myth is that donating substantial property or securities only benefits high-net-worth individuals and is impractical for the average donor.
Fact
In reality, while more affluent individuals may take advantage of such donations, any donor with appreciated assets can benefit from tax advantages associated with gifting such items. Nonprofits should educate all donors on the value of these contributions, regardless of their overall wealth.