Save more when you give appreciated Real Estate to Lucky Duck Foundation. Here is one way to pay less taxes when you sell your appreciated real estate: Give a portion of your real estate to Lucky Duck BEFORE you sell the real estate. By giving a partial interest in real estate (that you have owned for one year or longer) before you sell the entire real estate interest:

• You will never have to pay capital gains taxes on the portion that you give to charity; and
• The income tax deduction for the gift will greatly offset any capital gains taxes associated from the sale.

Here’s an example
Mom and dad purchased rental property for $200,000 in 1991. They are tired of managing the property and plan to sell the property for its current value of $1,000,000. If mom and dad are in the top 37% ordinary income tax bracket and 20% capital gains tax bracket, if they sold the entire property without first making a charitable gift, they would pay $160,000 in capital gains taxes (20% x $800,000 in capital gains taxes) and net $840,000.

By giving 50% of the rental property to Lucky Duck BEFORE they (have a binding obligation to) sell the property:

• Mom and dad will never have to pay long-term capital gains taxes on the $400,000 in appreciation from the 50% interest; and
• They will receive a $500,000 income tax deduction to offset their ordinary income.
• Therefore, they will only pay $80,000 in capital gains taxes (20% x $400,000); and they will receive $185,000 in ordinary income taxes (.37 x $500,000), for a total tax savings of $265,000.
• Therefore, they will net $420,000 in sales proceeds and $185,000 in ordinary income tax savings = $605,000. Furthermore, a charity, like Lucky Duck would receive $500,000 (50% interest in the property).
• Therefore, the cost of giving $500,000 in real estate to Lucky Duck only reduces mom and dad’s net proceeds from $840,000 to $605,000. In other words, the cost of a $500,000 gift to Lucky Duck could be as little as $235,000.