Real Estate Example

Lorraine volunteers at her local library and regularly attends the symphony with her granddaughter. She owns a beach house that she rarely uses. She is tired of dealing with the maintenance, taxes and insurance costs associated with this property. Lorraine wants to sell the property but is worried about the capital gains tax associated with such a sale.

Lorraine donates the beach house property to the Community Foundation. She receives an income tax deduction for the fair market value of the property. Because this is a donation, not a sale, Lorraine does not pay capital gains tax on the property.

The Community Foundation sells the property, but does not pay capital gains tax because it is a 501©3 nonprofit charity.

The proceeds of this sale are invested in the Community Foundation’s investment pool and used to create a donor advised fund held at the Community Foundation. Lorraine uses the fund to make grants to both the symphony and the library every year.