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Funding a Donor Advised Fund with Complex Assets

Posted on January 25, 2021
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The Drexel Donor Advised Fund (DAF) makes philanthropy simple and easy, providing a flexible and convenient vehicle for charitable giving.

A Drexel DAF is an account established to allow you to make charitable contributions, receive an immediate tax benefit and recommend grants to support whatever Drexel University college, school or program you choose (as well as your other favorite causes) on your timetable – even in a different tax year.


Funding a Drexel DAF

Most gifts to a DAF consist of cash or publicly traded securities. However, a Drexel DAF is also an excellent solution for individuals who want to donate complex assets that might otherwise be difficult or inconvenient to split between several charities, such as real estate.

Donating real estate can be an especially effective way for you to fulfill your charitable goals. Not only can you make a significant charitable gift to a cause that matters to you, but you may do so using an asset that isn’t producing income or requires expensive upkeep to maintain. And, donating the appreciated asset frees you from any potential capital gains liability.


Gifts of Real Estate

The value of real estate must be established by a qualified appraisal prepared by a qualified appraiser hired by you, as the donor. The appraisal may not precede the gift of the real estate by more than 60 days and must be completed by the tax return deadline (including extensions) for the year of the gift.

Generally, a donor who contributes real estate held for at least one year may take a charitable deduction based on the full fair market value of the property as determined by the appraiser. However, as with other complex assets, real estate will typically be sold immediately, and the sale price will be relevant for determining the value of the gift. Federal tax law limits an individual’s charitable deduction for gifts of long-term capital gain property, such as real estate, to 30% of the donor’s AGI.

The unique characteristics of real estate create potential liability for its owners, and Drexel will need to evaluate any gift of real estate for specific risks before agreeing to accept it.


After the DAF Sells the Property

  • Real estate donated to a DAF will typically be sold soon after contribution. However, even if a property is highly appreciated at the time of contribution, the donor will generally avoid any recognition of gain and will not have to pay any associated taxes upon the sale by the
  • The net sale proceeds of the donated property will be deposited into the DAF. (This amount may be different from the value of the property for the donor’s tax deduction purposes, both because of the costs involved with the sale and because values may fluctuate between the date of the gift and the date of sale.)
  • The donor’s DAF account will be reduced by any special charges or taxes associated with the property.

Establishing a Drexel DAF may offer you some distinct advantages over making direct charitable donations from a flexibility and strategic tax-planning perspective.

Questions?

Contact David Toll, JD, senior associate vice president, in Drexel University’s Office of Gift Planning at (215) 895-1882 or giftplanning@drexel.edu.

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