Non-Cash Philanthropy: Donating Real Estate and Business Interests

Quick overview

Donating a piece of real estate or a stake in a business is a form of non-cash philanthropy that can multiply the impact of your gift while offering tax benefits when done correctly. The basic idea: transfer ownership of an appreciated asset you no longer want or need to a qualified charity, receive a charitable income tax deduction (within IRS limits), and, in many cases, avoid paying capital gains tax you would owe if you sold the asset first.

This article explains the tax rules, valuation and reporting requirements, common strategies, and practical steps to make these gifts effective for both you and the charity.

Key tax rules and paperwork (what you must know)

• Charitable deduction value: For long-term appreciated property given to a public charity, donors generally may deduct the fair market value of the asset, subject to adjusted gross income (AGI) limits (typically 30% of AGI for gifts of appreciated property to public charities; lower limits apply for certain private foundations or gifts treated as ordinary income property). (See IRS Publication 526) (https://www.irs.gov/charities-non-profits/charitable-contributions, https://www.irs.gov/pub/irs-pdf/p526.pdf).

• Form 8283: If your noncash donation is more than $500, you must complete Section A of Form 8283 and attach it to your tax return. For donations with claimed value over $5,000, you generally must obtain a qualified appraisal and complete Section B of Form 8283 (unless the donation is publicly traded securities). (IRS Form 8283 instructions) (https://www.irs.gov/forms-pubs/about-form-8283).

• Qualified appraisal and qualified appraiser: The IRS expects a competent, independent appraisal for most gifts above $5,000. Appraisers should meet the definition in IRS rules; rushed or DIY valuations are often challenged in audits.

• Basis and capital gains: If you donate appreciated property held long-term, you generally avoid capital gains tax on the appreciation. If you instead sell the property and donate the proceeds, you may have to pay capital gains tax first and can only deduct the cash gift.

• Limits and carryovers: If your contribution exceeds AGI limits, excess deductions may be carried forward for up to five years, subject to the same limits in later years.

Types of assets and special considerations

• Real estate (residential, commercial, vacant land): Charities must be able to accept and use or liquidate the property. Gifts of real estate require title searches, environmental reviews for commercial or contaminated sites, and clear conveyance documents. For residential property, retained interest (e.g., life estate) changes the deduction calculation.

• Closely held business interests (partnerships, LLCs, S-corporations): Donating a partial interest or an interest in an active business is complex. The IRS scrutinizes transfers that could create tax avoidance. Valuation may require discounts for lack of marketability or control, and certain transfers (like inventory or ordinary-income property) are deductible at different limits.

• C corporations or S corporations: S corporation stock can present unique hurdles because S corp shareholders must meet eligibility rules and the corporation’s shareholders may need to approve transfers. Transferring a minority interest often requires a valuation and careful legal review.

• Publicly traded securities: These are the simplest non-cash assets to donate—if you donate long-term appreciated stock directly to charity, you typically get a fair market value deduction and avoid capital gains tax. No qualified appraisal is required for securities traded on an established market.

• Tangible personal property (art, collectibles): Deduction value depends on whether the charity uses the item related to its mission. If the item is sold by the charity, different valuation rules apply and the deduction may be limited.

Practical steps to make a donation (workflow)

1. Decide on the charitable vehicle and confirm the charity’s ability to accept the asset. Not all nonprofits can accept real estate or business interests—discuss logistics and carrying costs before transferring title.
2. Talk to your tax advisor and an attorney experienced in charitable transfers. In my practice, early coordination prevents surprises and saves transaction costs.
3. Obtain a preliminary valuation and, if appropriate, a qualified appraisal. For gifts > $5,000, plan for the appraisal timeline—it can take weeks.
4. Complete required IRS forms (Form 8283 for noncash donations over $500) and gather supporting documents: deeds, title reports, environmental assessments, corporate records, partnership agreements, and correspondence with the charity.
5. Close the transfer: execute conveyance documents, update corporate records (for business interests), and make sure the charity files any acceptance documentation.
6. File your taxes with the correct attachments and retain copies for your records. Keep appraisal reports and written acknowledgements from the charity.

Common strategies (when to use each)

• Direct gift of property: Best when a charity can accept and either use or sell the asset; maximizes donor deduction for appreciated property and avoids capital gains.

• Bargain sale: Sell the property to a charity for less than fair market value. You receive some cash (or a note), a partial charitable deduction, and only pay capital gains on the portion you sold. Useful when you want some liquidity and still support charity.

• Donor-Advised Fund (DAF): You can donate appreciated assets to a DAF (subject to sponsor acceptance) to secure an immediate tax deduction and recommend grants over time. See our practical guide to donor-advised funds for details and best practices (donor-advised funds).

• Charitable Remainder Trust (CRT): A CRT lets you transfer property into a trust that pays you (or other beneficiaries) income for life or a term, with the remainder going to charity. This can provide income, reduce capital gains and estate tax exposure, and support long-term giving (charitable remainder trusts).

Real-world example (illustrative)

A client owned a rental house acquired years ago for $150,000 and currently valued at $500,000. Selling would generate a large capital gain and tax liability. The client donated the property to a qualified housing nonprofit that accepted the asset. Because the property had been held long-term and the charity qualified, the client claimed a charitable deduction for the fair market value (subject to AGI limits) and avoided capital gains tax. The nonprofit sold the property and used proceeds to build housing.

Note: outcomes vary by taxpayer. This is illustrative, not tax advice.

Common mistakes and pitfalls

• Skipping the charity conversation: Many donors assume charities will accept any asset—confirm acceptance, carrying costs, and timing before finalizing plans.
• Weak or late appraisal: An IRS audit often focuses on valuation. Use a qualified appraiser and document the process.
• Ignoring environmental or title issues: For commercial real estate, cleanup or title defects can make a gift worthless to a charity.
• Treating business transfers casually: Partnership or corporate transfers can trigger buy-sell clauses, shareholder approval needs, or taxable consequences.

Checklist before you give

• Confirm the charity’s 501(c)(3) status and capacity to accept the asset (IRS Exempt Organizations Select Check and charity’s governance).
• Get a written, independent appraisal when required.
• Request a written acceptance letter from the charity describing the gift and any restrictions.
• Complete Form 8283 when required and attach to tax return.
• Plan for carryforward rules if your deduction exceeds AGI limits.
• Coordinate with estate planning if the donation is part of a legacy plan.

When to get professional help

If you are donating real estate or business interests worth more than a modest amount, consult a tax attorney, CPA, or charitable giving advisor. In my practice, complex transactions routinely involve a tax attorney for transfer documents, a CPA for deduction planning, and an appraiser for valuation—this reduces audit risk and aligns the gift with both tax and philanthropic goals.

Frequently asked quick answers

• Do I need an appraisal? Yes for most noncash gifts over $5,000 (exceptions for publicly traded securities). (IRS Form 8283 guidance) (https://www.irs.gov/forms-pubs/about-form-8283).
• Can I deduct full market value of appreciated property? Often yes for gifts to public charities if you’ve held the property long-term, subject to AGI limits. (IRS Publication 526) (https://www.irs.gov/pub/irs-pdf/p526.pdf).
• What if the charity can’t accept my asset? Consider selling the asset and donating proceeds, using a DAF if accepted, or structuring a bargain sale or trust.

Professional disclaimer

This article is educational and does not replace personalized legal, tax, or financial advice. Tax law changes and individual facts matter—consult your tax advisor, attorney, or financial planner before completing any non-cash charitable transfer.

Authoritative sources and further reading

• IRS — Charitable Contributions: https://www.irs.gov/charities-non-profits/charitable-contributions
• IRS Publication 526, Charitable Contributions (current as of 2025): https://www.irs.gov/pub/irs-pdf/p526.pdf
• IRS — Form 8283, Noncash Charitable Contributions: https://www.irs.gov/forms-pubs/about-form-8283
• FinHelp guides: donor-advised funds (donor-advised funds) and charitable remainder trusts (charitable remainder trusts).

If you’d like, I can draft a one-page checklist you can bring to your CPA and the charity before you start the transfer.