Gifts of Real Estate

Just as with securities, you receive an income tax deduction for the full fair market value of your gift when you transfer the deed for all or part of your real property to Cal State Fullerton. And you pay no capital gains tax on the appreciated value. For example, Jim and Grace transfer rental property worth $500,000 for which they paid $100,000. They save $200,000 in income taxes (40 percent bracket) and $80,000 in capital gains taxes — a total tax savings of $280,000. They can’t use the full tax deduction in one year, but can carry it forward over five more consecutive years. Their $500,000 gift cost them less than half that to give!

You can also give your home, but retain the right to live there for your lifetime. Known as a Life Estate Agreement, this arrangement allows you to receive a current income tax deduction, and also reduce your estate tax liability. For example, John, age 80, deeds his house worth $500,000 to Cal State Fullerton, but continues to live there for his lifetime. He receives an income tax deduction of $302,000, saving him $90,600 in taxes. He can’t use the deduction in one year, but spreads it over six years, saving him $15,000/year in income taxes. Also, the house is no longer included in his taxable estate.

For additional information about gifts of real estate, please contact Michele Cesca, Associate Vice President, Central Development and Major Events, at 657-278-4869 or mcesca@fullerton.edu .