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Gifts of Residence or Farm with a Retained Right to Use the Property
Because of special provisions in the tax laws, donors can give the Foundation their personal residence or farm, yet continue to live there for the remainder of their life. Further, a donor can provide that their spouse may live there for his/her lifetime; or the donor may continue to live on the property for a set number of years. Either way, the donor receives an immediate income tax deduction for the contribution.
The property does not have to be the donor's primary residence - it can be a vacation or second home, as long as the property is used as a personal residence. Further, in the case of a farm, the donor does not have to reside on the property. Donors can also give stock in a cooperative apartment if the apartment is used as a personal residence.
The charitable deduction is less than the full value of the property and equals the value of the remainder interest given to the Foundation (what the IRS calculates is the present value of what the Foundation will receive in the future.) There are also charitable deductions available for estate or gift tax purposes, if the life interest is given to one or two individuals and the remainder interest is given to charity. The estate or gift tax deduction is equal to the value of the remainder interest.
Example: Mrs. Warner, age 72, donates her personal residence - a house and land - with the reserved right to live on the property for the rest of her life. At the time of the gift, the land has a value of $100,000.00 and the house has a value of $200,000.00 with an estimated useful life of 45 years. Taking into consideration adjustment factors and the projected value of the property when the Foundation is to receive it, the charitable deduction is $118,711.00.