An anonymous donor found a way to sell a piece of real estate, avoid taxes and donate $690,000 to Breakthrough Central Texas, using a little known tool through the Austin Community Foundation. He also received a tax deduction for his gift.
“For Breakthrough, this was a first,” said Grace Holland, chief development officer for Breakthrough, a nonprofit that helps first-generation college students complete a degree. “It’s the largest single check that Breakthrough has ever received.”
Holland explained that had the donor sold the home and then donated the proceeds, because the home had increased in value, he would have had to pay capital gains taxes, which also would have resulted in a smaller donation. But by donating it directly to charity, the donor did not have to pay those taxes and he received the benefit of a charitable tax deduction.
The donor got the idea for donating the house because he knew nonprofits accepted cars as donations. “People donate a car because they just don’t want to deal with the hassle of selling it. So I just thought there must be an avenue like this for real estate,” he said.
A story that changed his life
“I don’t need anything,” said the donor. “I grew up here, on the right side of the tracks. About seven years ago, a friend invited me to a Breakthrough event. It was a small gathering. And there was this student who spoke. He was in high school and he was so grateful to Breakthrough because he was about to go to college. He talked about having to sack groceries and raise his three siblings at the same time. And that story changed my life.”
He became a Breakthrough supporter right then. As a long-time supporter of Breakthrough, he says he knew that, like most Austin-area nonprofit organizations, Breakthrough did not have the staff or time to handle the acceptance and sale of a home. That’s when he contacted the Austin Community Foundation.
“That’s one of the roles we can play for donors,” said Coralie Pledger, chief financial officer of ACF. “We’re just more efficient. We have counsel with that experience and we have a process.” ACF charges a fee for processing the sale and donation, but Pledger says the fee is based on the level of complication of the transaction. ACF handles 12 to 20 donations of real estate assets a year, and donors either designate a charity for the gift or they add it to a donor-advised fund.
The entire transaction took less than three months, said Pledger, though she advises that not every donation of assets is as simple. The donor did not owe money on the property and did not use it to generate income, plus the current Austin housing market made for a quick sale.
It can get complicated, said Pledger, but she added, “I sense a great deal of satisfaction for donors. A lot of times we are taking something that’s become a hassle and turn it into something good.”
The opportunity to succeed
“It was the most exciting thing I’ve ever done,” said the donor. He said he hopes others will be inspired to take their unwanted real estate property and donate it to a cause they care about rather than sell it.
“It’s just too easy to be born in the wrong place and have all the obstacles,” said the donor. “We need to take those obstacles away and make sure everybody has the same ability to succeed. I have kids and I like to say they were born on second base and now they’re just kind of walking toward home plate. But the kids Breakthrough helps, they were born in the dugout, and they want to get at bat. If they get a chance at bat, man, they’re just going to soar.
“Austin is one of the most economically segregated cities in the country. It doesn’t have to be that way. This is my city,” said the donor, an Austin native. “I’ve got about 20 years left on this planet, so if I’m going to make this a better city, then it’s got to start with the kids.”