The Community Foundation of Western Nevada is all about philanthropy, and we go about it with a business sense. We are a different type of charity that operates a different type of business. Most of the contributions we receive are not checks but stock, property, and other types of assets. The Community Foundation approach to philanthropy has helped hundreds of donors make substantial gifts to support charitable organizations and projects in the region.
Finding an Asset to Contribute
Whether initiated by a donor or by their professional advisor, our gift-planning process begins with exploration. We discuss the cause the donor wants to support, their financial situation to a certain extent, and if appropriate, their estate plans. Typically through this process, we can identify an asset or assets that aren’t working for the donor, and may be considered appropriate for a gift. The value of the asset does not have to match the donor’s charitable goals. Many of the asset gifts we receive are for a percentage of the total asset with the non-gifted portion going in the donor’s pocket. The gifts are structured to avoid capital gains and provide a charitable gift deduction. The asset may be sold now, or held if that is the plan, but once sold the proceeds are placed in a charitable fund that is custom designed to meet the donor’s philanthropic goals.
Give Before Selling
Making the donor aware that the opportunity to make a tax-advantaged charitable gift before selling an asset is key to the strategy of gifting an asset. Many times we’ve been contacted by generous people who have just sold a company, or property, and are excited to establish a charitable fund. In these situations, the donors could have avoided paying significant taxes if they had gifted the asset, or a portion of the asset, to the Community Foundation before selling it. We work closely with the donor’s professional advisors to plan these arrangements, most frequently working with attorneys and investment advisors, but also with accountants, financial advisors, and even real estate agents.
These are complex gifts with many IRS rules to follow but the Community Foundation staff and board are knowledgeable and careful and, as a result, we handle these transactions expertly.
Timing is Critical
Often these gift arrangements are timed due to a life event, such as relocating, selling a company, simplifying life by converting rental properties to life income instruments, inheritance, or family succession planning. Sometimes the gift arrangements happen just because the donor decides it is the right time to focus on giving back to the community.
Zero Tax Sale
One example of a type of gift we have received numerous times is what we call the “zero tax sale.” In this scenario, a donor has an income property they wish to sell. Typically it has a low basis so it will be subject to capital gains tax. We do a calculation based on their personal tax situation and on the estimated sale value and basis of the property. That calculation tells us how much of the property they need to “gift” to the Community Foundation to exactly offset the taxes they would pay. The donor gifts that percentage of the property and the Community Foundation lists it for sale. When the property sells, the contributed portion goes into the donor’s charitable fund at the Community Foundation for community grants, and the remaining portion goes into their pocket.
We invest the assets and, even with our economic turmoil, our 5-year investment return has averaged slightly better than 5 percent. The donor not only has the gift sale proceeds in a charitable fund, but that fund is growing; so the donor even has more to give away. I sometimes describe this arrangement as “costing the donor 60 cents to have a dollar to give away.” It is a generalization, but the donors who have gifted through this mechanism are happy with the results. We could even get fancier and have the proceeds go into a charitable income instrument that pays income to the donor or to family members they designate.
The Community Foundation is a unique charity that builds a unique business in the region. Over the years, we’ve received multiple properties in California for transplanted residents, commercial property and land in five states. The Community Foundation owns an operating company and long-term lease on a grocery store in Memphis. Local donors have contributed a rare Testore violin, lumber property in Oregon, and fractional interests in dozens of properties in Washoe, Churchill, Lyon, and Storey Counties. Each of these “unusual” gifts is received with gratitude for the donor’s generous spirit and the gift’s concrete charitable benefit in our region. We are honored to be a trusted partner with donors and their professional advisors.
Call to discuss a charitable gift of property, 775-333-5499. Learn more at nevadafund.org.
Chris Askin is the president and CEO of Community Foundation of Western Nevada.
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