Forest Lake Christian School : 2007 : Giving

About: Giving

Thank you for your interest in furthering the ministry of Forest Lake Christian School through giving. Our mission is to partner with parents to educate Christian young people who will make a difference in the world for Jesus Christ. We must rely on tuition and gifts to provide this type of education. We rely on God’s people to provide the funds and after all, aren’t we merely managers of God’s resources?

As a steward of the resources that God blesses each Christian to control, many of us make real estate or stock investment decisions that become highly appreciated assets. As the asset grows in value, or the income stream is reduced, we are faced with the decision to sell the asset. Many times, I have heard of property owners express their desire to sell the asset, however, that decision is often postponed due to the Capital Gains Tax exposure upon the sale.

If you need to sell an asset, wouldn’t you rather direct some of the tax you have to pay IRS to Forest Lake Christian School? Following are several ways:

Gift then Sale

How this works is before you list or market your property, gift a percentage of the property ( or stock) to Forest Lake Christian School. As of the date the gift is recorded, the appraised value is a tax deduction from your taxable income for the year that the gift was recorded. Then sell your property and at the close of escrow, the funds are transferred to Forest Lake Christian School. Then the seller gets a second deduction because they have less gain to report as income.

Illustrations:

EXAMPLE 1

Using a $1,000,000.00 property for easy math. Assume a cost basis and cost of sale to be $500,000.00 so the gain would be $500,000.00 and assuming state and federal capital gain taxes to be 23%, the capital gain tax would be $115,000.00.

EXAMPLE 2

If the owner instead, donates a 20% interest in the property before the property is marketed, the owner then gets an immediate $200,000.00 reduction of taxable income because of the gift. The property is then sold and Forest Lake Christian School gets a $200,000.00 check from the title company. The owner then has to show only a $300,000.00 gain which slaches the capital gain tax to only $69,000.00 or a tax savings of $46,000.00 on the sale plus the $200,000.00 taxable income reduction.

Gift then delayed Sale

Perhaps the owner has a large surge of income and needs a tax write off but does not want to sell a property this tax year or perhaps for several years. The owner can gift a percentage of the property as illustrated above and get a taxable income reduction for that year the gift is recorded Forest Lake Christian School becomes a silent partner of the property with the owner retaining control and also retains any income generated by the property. The sale may be delayed for one year or more and the year of sale is at the discretion of the owner. The owner can even dictate in a Will that the property will not be sold until their passing.

If you or family members are contemplating the sale of a highly appreciated asset, please contact Willard Schoellerman at Forest Lake Christian School. Thank you in advance for considering Forest Lake Christian School in your stewardship planning.

Statically, a large percentage of Americans pass away without ever having made a will and the State then determines the distribution of the deceased’s assets. A Will or Life Estate is one of the most important documents a person ever writes in their lifetime. Make sure that you and your family members have a Will and prayerfully consider including a bequest to Forest Lake Christian School.