Curated by: Rubric Advisors
Estate & Legacy
Philanthropy with Complex Assets
Donating real estate, private stock, art, and other illiquid assets may offer significant tax advantages compared to cash donations.
Philanthropy with Complex Assets
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Why Donate Non-Cash Assets
- Donating appreciated property may allow the donor to avoid capital gains tax on the built-in gain
- Donors may generally claim a deduction for the fair market value if the asset was held longer than one year
- This approach is particularly powerful for assets with a very low cost basis relative to current value
- Donating appreciated assets can be more tax-efficient than selling the asset and donating cash proceeds
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Why Donate Non-Cash Assets
- Donating appreciated property may allow the donor to avoid capital gains tax on the built-in gain
- Donors may generally claim a deduction for the fair market value if the asset was held longer than one year
- This approach is particularly powerful for assets with a very low cost basis relative to current value
- Donating appreciated assets can be more tax-efficient than selling the asset and donating cash proceeds
Donating Real Estate
- A qualified appraisal is required by the IRS for donated property valued at more than $5,000
- Receiving charities may have environmental liability concerns that affect their willingness to accept
- Fractional interest donations are subject to additional restrictions under current tax rules
- Some charities may decline real estate donations due to complexity, carrying costs, and liability exposure
Donating Private Company Stock
- Both S-Corp and C-Corp stock may generally be donated to qualified charitable organizations
- The receiving charity must typically be willing to hold the stock or have a buyer arranged
- An independent qualified appraisal is required for valuation, as there is no public market price
- Redemption by the company after donation may raise step-transaction risk and should be reviewed carefully
Donating Art & Collectibles
- The 'related use' rule provides a full FMV deduction only if the charity uses the art for its exempt purpose
- If the use is unrelated to the charity's mission, the deduction is generally limited to cost basis
- A qualified appraisal is required for donated items valued over $5,000
- The IRS Art Advisory Panel reviews valuations for donated items valued over $50,000
Donor-Advised Funds for Complex Assets
- Some DAF sponsors accept non-cash assets including real estate, private stock, and other illiquid holdings
- The DAF handles liquidation, so the donor may avoid recognizing capital gains on the sale
- The tax deduction is generally taken when the asset is contributed to the DAF, not when grants are made
- Not all DAF sponsors accept all asset types, so checking with the specific sponsor is important
Charitable Remainder Trusts
- An illiquid asset may be contributed to a CRT, which can then sell it without immediate capital gains tax
- The donor receives an income stream for life or a specified term of years from the trust
- The remainder of the trust assets passes to the designated charity at the end of the trust term
- CRTs may be particularly useful for highly appreciated assets that lack an immediate buyer
Documentation & Compliance
- IRS Form 8283 is required for non-cash charitable donations valued at more than $500
- A qualified appraisal and contemporaneous written acknowledgment from the charity are generally required
- Contribution limits for appreciated property are typically 30% of AGI, compared to 60% for cash donations
- Excess deductions may generally be carried forward for up to five additional tax years
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