Tax strategy with donated properties.

[Andrew S.]

@David KrulacThis started with:

@David Krulac

@David Krulac - is that really a legal strategy? If it is, why not rinse and repeat the process every year to generate a taxpayer-funded income stream?

I'm no accountant or tax expert at all - just sounds odd to me.

[David Krulac]

@Andrew S.

of course it is legal. And there is nothing stopping you from doing this more than once in your lifetime. I've donated property to a town for a park, I've donated property to a church, I've donated property to Habitat for Humanity. etc. etc. etc.

Its not an income stream, its a tax deduction.

You must own the asset for more than 1 year, like a long term capital gain, and for items over $500 you must get an appraisal, which I did and attached to the tax return.

Wealth people use this technique all the time with works of art. you buy a Picasso for $1 million keep for a number of years then donate it to an approved charity with an appraisal of $15 million and take a tax deduction for $15 million.

There was a person who built a very upscale house, one of the most expensive houses in the whole area. He moved and built an even bigger house and listed his old house for sale for $10 million, that's a lot of house here. He could not sell it as there is a very thin market for $10 million houses. Many people who can afford a $10 million house want something very specific and end up building a new house to their exact tastes. so what did he do with a house he could not sell? He donated it and took a $10 million tax deduction.

The caveats are:

1. You have to find somebody willing to take the property. some charities don't want to be bothered with real estate, particularly if they perceive it as white elephant.

2. The charity must be IRS approved as a registered charity.

3. You must get a certified appraisal.

4. You must have owned it for more than 1 year to take a value other than your purchase price.

5. Its all legal check with your CPA.