RISE IN REAL ESTATE DONATIONS MEANS NEW FEE OPPORTUNITIES

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

3. Presented by:Chase V. Magnuson, CCIM

4. 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

5. 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

6. 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

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

8. 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

9. 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

10. 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

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

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

13. 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

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

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

16. 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

17. 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

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

19. 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

20. 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

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

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

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