Donate or sell land to charity?

[Kea]

A client called today to say she wanted to donate land to a church. She owns 7 acres and has been renting out. She is considering:

selling it to them at a discount

selling outright and donating proceeds

or donating a subsection of it.

The shocking part is that she is asking me before taking action!

My instinct is to advise her to sell the land and pay tax at the max 15% capital gain (all land so no depreciation) then donate the cash and take the Sch A deduction. At that point, she can decide exactly how much she wants to donate. Since it has been rented I don't think I can use the strategy for donating appreciated assets (and avoiding the capital gain tax).

Are there other options that my pre-tax season brain is not thinking of?

Thanks.

[Jake]

"Since it has been rented I don't think I can use the strategy for donating appreciated assets (and avoiding the capital gain tax)."

Why not?

[Kea]

"Since it has been rented I don't think I can use the strategy for donating appreciated assets (and avoiding the capital gain tax)."

Why not?

Don't I have to show a sale of business property? Would I show it as sold for $0? Take a capital loss and charity deduction? Sounds like double dipping.

[kcjenkins]

Even tho it STARTS on the 4797, it then goes to the Sch D, if it has been held over a year, Kea.

[jainen]

>>it STARTS on the 4797, it then goes to the Sch D<<

She can donate it directly and take the FMV on Schedule A. She needs an appraisal because it is more than $5000. Fortunately there is no depreciation to recapture or other "ordinary income" to mess this up. If she wants some money for it, she can do a bargain sale that will still avoid some percentage of the capital gains tax.

There are many other ways to set it up so she can receive some money. She can retain a life estate and continue to receive the rental income. Or she can put the property in a Charitable Remainder Trust with a similar result. Most churches have a lawyer or accountant who can advise her about her specific options.