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Nonprofit Law/Capital gain taxes

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Question
I have assets that I personally own that when sold I will be required to pay capital gains taxes
If I sell the assets while they're in my name and then give 100% of the proceeds to a 501(c) three organization
Will I be required to pay the capital gains taxes

What is the best way and your recommendation as to how to handle this transaction

If I set up a charitable remainder trust is either I or the trusts taxed at the capital gain

Thank you for your help

Answer
If you sell the assets while they're in my name and then give 100% of the proceeds to a 501(c) three organization you will I be required to pay the capital gains taxes.  The capital gains attaches once you sell appreciated property.

However, if you donate the assets to a 501(c)(3) organization that is a public charity, you would realize a donation that is deductible as charitable contributions for federal income tax purposes and can roll it over for 5 years.

See IRS Publication 561, "Determining the Value of Donated Property", which is available at www.irs.gov/pub/irs-pdf/p561.pdf and which discusses on page 2 that the deduction for donations of property is in the amount of the fair market value. The rest of the publication addresses certain types of property that would not be applicable in your case (unless you donated items such as cars or boats) and it also addresses valuations when the property is worth more than $5000. If you are a dealer different rules apply to donations from inventory.

As for donations of assets to a charitable remainder trust, "You will receive an immediate charitable income tax deduction based on a portion of the fair market value of the assets donated to the trust....If you fund a trust with appreciated securities or property, no capital gains tax is due on the stock you donate." http://giving.tufts.edu/ways_to_give/giftplanning/remaindertrusts.html

"With a charitable trust you can turn appreciated property (property that has gone up significantly in value since you acquired it) into cash without paying capital gains tax on the profit.  A charity usually sells any non-income-producing asset in a charitable trust and uses the proceeds to buy property that will produce income for you. Because charities, unlike individuals, don't have to pay capital gains tax, if the charity sells your property, the proceeds stay in the trust and aren't taxed." http://pages.citebite.com/h2j0b7j5q9tqt

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic

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I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


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