Gift Annuity for Real Estate
Jonathan purchased his home many years ago for $80,000. The home is now worth $420,000. Jonathan wants to sell his home and buy a condo for $130,000. If Jonathan were to sell the home and use his one-time $250,000 home exclusion, he could offset part of the gain but would still have to pay capital gains.
Jonathan: My home has been a wonderful investment. My late wife and I raised our kids there, but it was getting more difficult for me to keep up with the yard work. I wanted to sell my home and move to a condo. With fewer responsibilities, I would be able to spend more time with my grandkids.Jonathan talked to Marisa at Phoenix Theatre, who told him he could sell the home, avoid the tax and make a generous gift to the theatre.
Jonathan: I learned a lot from my conversation with Marisa. She told me that I could sell my home to the charity for $130,000, which would give me the money I needed to buy the condo. Phoenix Theatre would take the balance of the value of my home, $290,000, to fund a charitable gift annuity that would give me both a tax deduction and provide me with fixed payments for the rest of my life.Jonathan transferred his home to the theatre in exchange for the charitable gift annuity. The gift annuity produced a nice tax deduction that Jonathan used to offset the gain on the sale portion to the theatre. He also used the home exclusion to offset the remaining capital gains associated with the payments he received from the annuity.
Jonathan: Using my home to fund the gift annuity was the best decision I could have made. I avoided tax on the sale of my home and really enjoy the benefits of the large annuity payments. Best of all, because the payments are fixed, I don't have to worry about market fluctuations.