The concept of the Life Estate is relatively simple. A donor may choose to donate a personal residence to Radio Kansas. However, the donor is able to continue living in the home or even renting it out for the remainder of their life. The donation results in an immediate tax deduction for the donor, which is what makes this method of donation so attractive. The deduction is based on the "remainder interest" of the property. That is the value of the property, less the value of the donor using it for the remainder of his life. In the end, Radio Kansas receives title to the home and can sell it.
  
Here is an example:

  Will Jefferson has resided in his modest home on a four acre lot for many years. He now is age 80 and his IRA distributions continue to increase. In order to create a charitable deduction to offset his increased taxable income, Mr. Jefferson is contemplating transferring the remainder in his home to Radio Kansas. With his IRA and other assets, he has substantial liquidity and will not need the value of the home for living expenses. He decides to deed the remainder interest in the home to Radio Kansas. Based upon his age, he receives a charitable deduction of $201,930. This deduction is an appreciated-type deduction usable to 30% of adjusted gross income. Over a period of four or five years, this charitable deduction will save $70,676 in income taxes. The deduction is based on assumed values for the residence of $50,000 and for the land of $250,000. While it is unusual for such a modest residence to be on expensive land, Will has lived on that property for many years and the adjoining city has now developed all around his property, thus increasing substantially the value of the land.

      To qualify for a Life Estate, any property used by the donor as a personal residence is acceptable. Vacation residences also qualify. The term "personal residence" also includes stock owned by a taxpayer in a cooperative housing corporation. A farm also qualifies for a Life Estate donation. The term "farm" is defined as property used for production of crops or grazing land for cattle. The farm also includes fixtures, such as buildings, grain bins and other permanent improvements. Normally, the transfer of a residence may include reasonable surrounding grounds. Nearly any property used as a residence or for agricultural purposes will qualify for a life estate gift.


 
 

For more information, contact Sharon Webb at 1-800-723-4657
or swebb@radiokansas.org.






 
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