Turning Real Estate Into Charitable Assets

Joe WishcamperAs founder and first president of the Maine Real Estate Development Association, Lyndel “Joe” Wishcamper has had extensive experience in the field. In recent years he has worked with MaineCF on several occasions to convert properties into charitable funds. Jennifer Southard, vice president, donor services and gift planning, sat down with Wishcamper to discuss the philanthropic potential of real estate.

MaineCF: How did you first learn about the Maine Community Foundation?

Joe Wishcamper: I was introduced to the foundation through my wife, Carol, who was serving on the board at the time. I remember going to an event at Betty Noyce’s house in Bremen.  I didn’t really know what the organization was and it was still very small (MaineCF’s assets were around $10-15 million back then).

MaineCF: Why did you consider giving gifts of real estate instead of other assets?

Wishcamper: My wife and I had decided to make a commitment to charitable giving. We learned that creating a donor-advised fund at MaineCF and funding it with a large initial gift would allow us to take a charitable deduction for the full amount of the contribution in the year we made it. We would also gain the flexibility to direct grants to charities of our choice. We found this very appealing.

We considered several options for funding our donor-advised fund: with cash, receiving a standard tax deduction; giving appreciated securities, where we would receive a deduction for their appreciated value; or gifting investment real estate, where we would receive a deduction for the appreciated value of the property and the added benefit of avoiding the deferred tax liability created by the depreciation deductions we had taken. We’ve now made two real estate gifts to MaineCF.

MaineCF: What should others know before they consider a gift of real estate?

Wishcamper: Here are a few key points to keep in mind:

  • Be aware that MaineCF has to be careful about what it accepts since the foundation doesn’t want to take property that requires a financial investment to make it saleable.
  • Get to know MaineCF’s real estate gift criteria, such as whether the foundation will accept properties with debt.
  • Consider your tax basis for the property. If you have a negative tax basis in the property and expect to pay a large tax if you sell the property, then it might be a good time to consider a charitable gift.
  • Review your tax situation. Most taxes paid on real estate fall under the 15% capital gains rate, but the rate is 25% on gains arising from the reduction in your tax basis from depreciation you have taken.
  • If you are a Maine resident and the property is located outside of Maine, you should determine whether your donation will entitle you to a state tax deduction as well. Basically, the more taxes the sale of your property is subject to, the more incentive there is for you to give it away.
  • Review all considerations to determine whether the property has reached the point where you should dispose of it, including refinancing, changes in your family situation, and/or your age and retirement plans.

MaineCF: How did the process work from your perspective?

Wishcamper: I contacted MaineCF and we each had our legal counsel review the situation. Then I gifted the property to the foundation, which entered into a purchase-and-sale agreement with a buyer. The proceeds were used to create a donor-advised fund, providing us with a tax deduction in the year we needed it. Several years later, I made a second gift of investment real estate to the foundation. These gifts have made it possible for us to make a large number of grants to nonprofits through our donor-advised fund.

MaineCF: Any cautionary notes?

Wishcamper: MaineCF needs to be very selective in the properties it accepts, given the limited liquidity of real estate relative to other assets such as marketable securities. In all likelihood, MaineCF will want to have identified a potential purchaser for the property before it commits to the transaction. However, you cannot donate a property that is already under contract. If you are in talks with a potential buyer to sell a property and are interested in involving MaineCF, you must be sure not to sign any contracts to sell the property.

Lyndel J. Wishcamper, of Freeport, is manager and president of The Wishcamper Companies, Incl, in Portland. A graduate of Yale University and Harvard Law School, he has been engaged in real estate development for the past 40 years. He is chair of the Board of Trustees of the University of Maine system and serves on the boards of Maine Medical Center and The Nature Conservancy (Maine chapter). In 2004 he and his wife were honored as the Spurwink Institute Humanitarians of the Year.