We’ve been asked from time to time to share success stories for gift situations that come across our desks at Charitable Solutions. As a first case, this gift from last fall is a good example of certain nuances of the gift acceptance process for a principal residence.
CS was contacted by a charity asking for assistance with a donor inquiry. The first contact was in July for a property valued at about $6,000,000, located in a generally warm real estate market. There were several back and forth calls with the donor, including the charity rep, to make sure we understand expectations and perspectives of what a successful gift of this property would be to the donors, a husband and wife.
It was also determined that some additional work would increase the resale value of the property, so we negotiated with the donor on those added costs, along with an allowance for potential property taxes during the time of our ownership. Upon taking ownership of the property at the Dechomai Foundation in September, we contracted out for the interior and exterior work, and engaged a local realtor to market the property. We went to contract for the sale in late November (the week of Thanksgiving actually!) and the closing was right after the 12/25 holiday, netting proceeds of about $5.8 million. The grant of funds went out to the charity in mid-January.
Was this good for the donor? Yes - first, the donor liked the result and was appreciative of the effort put forth to complete this gift. The appraised value of the property was right in the vicinity of the sale price. The family was able to avoid about $1.3 million in capital gains taxes after working through the calculations of the appraised value, their cost basis, and the benefit of the exclusion on the sale of their principal residence. The donor effectively converted his illiquid residence into a fund from which he and his family can support their charitable desires for years to come.
Was this a good arrangement for the charity? Yes - they have a satisfied loyal donor who achieved his donative intent and were also pleased with the experience and the result. The charity wasn’t able to a handle a real estate gift of this type, especially given that they were a few thousand miles distant from the residence, property improvements were required, interim property management was necessary for the 3+ months between receiving the property and selling it, and regular interactions with the local real estate brokers were part of making the sale happen. Having Charitable Solutions to turn to in this case proved to be a perfect partnership for them.
And what was our take on the gift? In fact, it was pretty typical for the donation of a principal residence. In all, there were over 100 calls and emails throughout the process between Charitable Solution’s staff with the donors, contractors, the real estate brokers, and keeping the charity informed. In some situations, a potential buyer might be part of the early conversations with the donor, but in this case, we had to hire a realtor to advertise and manage the sale locally. Charitable Solutions collected a fixed fee for our work on this gift.
This is just one example of the of the $350+ million in illiquid assets received and managed by Charitable Solutions in 2018 (72 different gifts averaging about $5 million.) As mentioned, it’s a common gift opportunity in certain geographies, and we are available to discuss this kind of inquiry with you and your donors at any time.