Why Consider Noncash Contributions?
CHARITABLE GIFTS of property other than cash can benefit both Tulane and the individual making the gift. The amount of the charitable deduction is generally the fair market value of the property at the time of the gift to Tulane, but always check with your tax advisors. For example, you may have to make some adjustments to the amount of the charitable deduction or obtain a qualified appraisal of the donated property. But each year millions of Americans contribute tens of billions of noncash contributions to charity and reduce their income tax liability because of generous itemized charitable deductions. Popular noncash charitable gifts include publicly traded securities and real estate. Oftentimes the value of the asset has increased and the donor is entitled to a deduction for the full market value and the tax and any long-term capital gain is completely bypassed. The value of the gift of publicly traded securities is the average of the high and low price on the date of the gift. Gifts of real estate generally require a qualified appraisal as will most other valuable noncash gifts more than $5,000.
OTHER TYPES OF GIFTS
In addition to gifts of securities and real estate, Tulane also has received valuable "gifts in kind," including rare paintings, antiques, manuscripts, collections and historic memorabilia that serve to enrich the educational experience of our students, faculty, community and other scholars. Once again, the charitable deduction for these valuable gifts in kind will generally be the full fair market value at the time the contribution is made. This includes any appreciation or increase in value for items deemed to be a "related use" gift under IRS rules. Tulane's many galleries, collections, library and educational programs provide ample opportunities for a very wide variety of in kind gifts. Several examples are included in this issue of Seasons. Special rules apply to gifts of household items, vehicles, property subject to debt, partial interests, conservation easements, business inventory and taxidermy. These rules may be found in IRS Publication 526 along with other helpful information, which may be downloaded from IRS.gov.
THREE WAYS TO GIVE
- A typical gift in kind contribution might be a gift of art or rare documents to be used in one of many educational programs. For example, a collector may decide to downsize their collection and transfer several paintings and associated historic memorabilia to a particular College or program within the University. The collection of items may be worth five or ten times the original purchase price and be of even greater educational value. In this case, the individual would be entitled to an itemized charitable income tax deduction for the full fair market value of the items instead of their original cost. The charitable deduction may be so large that it can provide tax savings for as many as six years. They will need to substantiate the deduction with a qualified appraisal.
- In other cases, the prospective donor may have very valuable art or collectibles, but would like to convert the value of the asset into an income stream during retirement. Rather than sell the collection and incur capital gains tax, they may wish to consider funding a charitable remainder unitrust, which could sell the collection, bypass capital gain at the time of the sale and then provide annual payments to the donor, and perhaps another beneficiary, for life or term of years. In this gift plan, there are usually only very limited income tax deductions, but the donor preserves much more of the value of the asset to be invested to produce an income stream. These trusts have been established to benefit universities using rare automobiles, antique Paul Revere silver and even a Stradivarius violin.
- Another option would be to leave the art or collection to Tulane via a provision in your will or trust. The owner continues to enjoy the assets during his or her lifetime and knows that it will be put to good use by the University.
Depending upon the individual's goals, in kind gifts and other noncash gifts can provide an array of benefits. Our Gift Planning Team will be happy to explore various gift scenarios with you. We also recommend that you discuss your gift plans with your family and tax advisors.