Substantiating Charitable Deductions for Gifts of Appreciated Real Property

When a donor intends to contribute real property to the University, the donor needs to obtain a qualified appraisal to substantiate the value of the property in order to claim a tax deduction. The appraisal should not be obtained any sooner than 60 days prior to the gift, and can be secured up to the time the donor files his federal income tax return for the year in which the gift was made, e.g., if gift made by December 31, then April 15 of the following calendar year. It is the donor's obligation to obtain such an appraisal at his expense.

The University requests a copy of the appraisal to assist in its gift review and acceptance process. From a timing standpoint, this means that a donor and the University will typically have already agreed upon the terms of the gift, and the donor can then order the appraisal and complete the gift within sixty days of receiving the final written appraisal report.

Due Diligence for Real Property Gifts

With all gifts of real estate, the UW Real Estate Office performs a due diligence evaluation of the property to determine its acceptability. This evaluation has two purposes: to ensure a meaningful gift will result, and to ensure that the University and the donor share an understanding about the prospects for the disposition of the property.

Initially, the Real Estate Office obtains a preliminary title report and assesses the marketability of the property. This assessment will include an evaluation of the property's status with respect to outstanding mortgages, liens, and presence of hazardous substances. If hazardous substances or dangerous conditions are discovered, the University and the donor will discuss what remedial action the donor can take to bring the property to a condition that is acceptable for transfer to the University.

Post-Gift Disposition of Real Property

With outright gifts of real property, the University will endeavor to sell the property immediately or soon after its acceptance in order to fund the donor's chosen charitable purpose as soon as possible. If the property is donated to fund a charitable remainder flip unitrust, the University as trustee will also sell the property immediately or soon after the trust is funded in order to diversify the trust's investments and generate income for the donor.

There are times when the University does not sell donated real property. The most common examples involve properties that have academic and/or significant economic value to the University. The University's decision to retain ownership of a property is heavily influenced by the perceived value of the property to the University, the donor's gift purpose, current market conditions, the anticipated carrying costs associated with retaining a property and applicable land use and zoning regulations. In every case, the University treats all potential real property gifts on an individualized basis, and we strive to hold full and open discussions with donors to ensure an optimal philanthropic outcome for both the donor and the University.