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Rise in Real Estate Donations: New Opportunities for Fee and MAI's Benefit

This presentation at the AI Connect Fall Meeting explores the impact of real estate donations on both the donor and charity, as well as the potential benefits for MAIs. Learn about the different types of real estate gifts and how they can create business opportunities for MAIs. Presented by Chase V. Magnuson, CCIM.

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Rise in Real Estate Donations: New Opportunities for Fee and MAI's Benefit

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  1. RISE IN REAL ESTATE DONATIONS MEANS NEW FEE OPPORTUNITIES Presented to: AI Connect Fall Meeting July 23-24, 2013 Hyatt Regency, Indianapolis, IN

  2. Presented by:Chase V. Magnuson, CCIM

  3. Program Content • An overview of the charitable world • How real estate equities can be donated • The impact on the Donor and the Charity • A look at how MAIs may benefit Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  4. Learning Objectives • After completing this training, participants should be able to understand: • Benefits to MAIs, Donor, and Charity • Types of real estate gifts • Business opportunity for MAIs Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  5. Overview of the Charitable World • 2,000,000 Charities • $310 billion given in 2011 • Accept real estate for 3% of annual giving • 80% of all gifts rejected Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  6. Capital Wealth in the US Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  7. MAI’s Benefits • Normal service fees • Consulting fees • Annual CRT evaluations • Representation of new client (Charity) • Public relations exposure • National referral opportunities Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  8. Benefits for the Client / Donor? • Reduced capital gains taxes • Deduction for federal and state taxes • Lower transfer expenses • Eliminate management responsible Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  9. Basic Options for Donations • Straight / Outright donation • Bequest • Retained life estate • Charitable gift annuity • Charitable remainder trust • Bargain sale proceeds Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  10. Structure of an Outright Donation Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  11. Are You With Me? Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  12. Structure of a Retained Life Estate • Primary or secondary homes qualify • Donor must maintain the property, pay property taxes and insurance • Option to lease for another source of income or sell remaining interest to charity for lump sum • A CGA may be possible additional benefit Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  13. Charitable Gift Annuity (CGA) Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  14. Charitable Remainder Unitrust (CRT) Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  15. Gift of property Charitable Gift Annuity Donor Remainder to Charity Income tax deduction Reduced gains tax Fixed payments How a Charitable Gift Annuity Works • Donor transfers cash, securities, or other property to the Charity. • Donor receives an income tax deduction and may save capital gains tax. • The Charity pays a fixed amount each year to Donor or to anyone Donor names for life. Typically, a portion of these payments is tax-free. • When the gift annuity ends, its remaining principal passes to the Charity. Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  16. Summary of CGA Benefits 5.2% Charitable Gift Annuity ASSUMPTIONS: Annuitants 70 70 Principal Donated $100,000 Cost Basis of Property $20,000 Annuity Rate 5.2% Payment Schedule monthly BENEFITS: Charitable Deduction $26,214 Annuity $5,200 Capital Gain Income $3,598 Ordinary Income $1,602 Total reportable capital gain of $60,203.20 must be reported over 16.4 years, until all of the gain is reported. After 16.4 years, the portion of the annuity that was capital gain becomes tax-free. After 20.5 years, the entire annuity becomes ordinary income. Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  17. Comparison of Benefits Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  18. Tax Implications • Individual donor • Corporate donor • Sub-chapter S • Carry forward rules • Appraisal rules • Qualified gifts (capital gains properties) Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  19. How Might the Charity Benefit? • Cash proceeds from sale of the asset • Income stream from leases • Joint venture profits • Exchange opportunities • Ownership of office facilities Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  20. ANY QUESTIONS? Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  21. How to Convert Equity • Cash • Cash and carried financing • 1031 exchanges (partial) • Joint ventures Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  22. Charities Annual Holding Cost • Property taxes • Property and casualty insurance • Staffing time • Maintenance • Lost investment income Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  23. Time for Staff to Manage • Accounting for asset • Grounds and building maintenance • Collection of rents • Compliance with city ordinances MAIs HELPING PEOPLE!!! Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  24. What Happens at the Closing of the Sale of the Donated Property? Title Company divides funds: • All normal closing costs paid including commission • Donor or Charity fund the gift arrangement • Reimbursement of funds used to obtain reports and consulting services Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  25. What We Have Discussed • Benefit to charity • Types of real estate gifts • Business opportunity for MAIs Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  26. Fact… Each year Americans give charities $310 billion in donations, less than 3% is in real estate, although 26% of the nation’s wealth is represented by real estate. For charities at any level the opportunity for carving out a niche in this market is incredible! Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

  27. Thank you!!! NEW OPPORTUNITIES TO SERVE YOUR CLIENTS! Chase V. Magnuson, CCIM Real Estate for Charities chasemagnuson@msn.com

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