Donations of Complex Assets

Making a charitable donation of real estate is a convenient way to avoid realizing capital gains on appreciated property. However, donors looking to make these kinds of contributions must be mindful of the following considerations when working with CAF America, depending on the intended advice for our treatment of the donation:

When CAF America Is Granting the Property

Many donors want to gift their property to a foreign charity, and CAF America’s complex asset program is a fitting way to support those wishes while providing full deductibility. When we are advised to grant property, we consider the following:

• The grantee must pass an Equivalency Determination review conducted by CAF America before we accept the donation. This means that we must be able to make a good faith determination that the grantee would otherwise be considered a public charity in the United States, and involves an intensive review of governing documents, financial statements, and other core information provided by the grantee.
• Not only must we comply with U.S. rules and regulations around granting to non-U.S. entities, but we must follow laws in the grantee’s country that govern gifts from foreign entities. This has the potential to complicate timelines and can lead to extensive legal reviews.

When CAF America Is Liquidating the Property

Often, donors want to make gifts of real estate located either in the U.S. or overseas, and then advise that we sell it and use the proceeds for charitable purposes. In this situation, the following considerations apply:

• The property must be readily marketable. We will not accept donations of property that we cannot reasonably find a buyer for.
• We strive to avoid situations that could be considered a pre-arranged sale. The donor will be required to confirm that they have not made any arrangements (written or otherwise) with the eventual buyer. While we seek buyers for the property before the donation is made, this search is done in CAF America’s name and we do not represent the donor whatsoever.
• While donors may want to see a certain liquidated value from the sale of their donated real estate, we cannot guarantee a specific dollar amount to charity. The donor’s deduction is determined by the appraised value of the property at the time of donation.

CAF America receives many requests from donors wishing to donate art to benefit charitable causes around the world. Whether we are granting the piece or collection to a beneficiary charity or we are liquidating the item and granting the proceeds, there are a number of considerations that all donors—and their advised beneficiaries—must take into account when considering art as a charitable donation.

Form 8283: Related vs. Unrelated Use

Donors may only deduct the Fair Market Value (the value determined by a Qualified Appraisal) of their donated art if the donation is used to further the mission of the charity to which they are given—if they are deemed to be furthering a “related use.” Deductions on gifts made for unrelated uses are restricted to the cost basis of the art in question; in other words, what the donor paid to acquire it.

Art Loans

It is CAF America’s position that granting pieces of art within the three-year period during which donees must ensure related use, even if they are being granted to a reputable and established Gallery or Museum, does not fulfill the related use provision.

In order to best serve our donors who advise us to put their donation of art to a related use (and therefore qualify the gift for a FMV deduction), CAF America will loan the donated piece(s) to the beneficiary for this full three-year period, after which we will be able to fully transfer ownership of the property to the grantee.

Learn how CAF America enabled a donor estate to receive a charitable deduction by reuniting pendant portraits in a British Gallery in our case study Reuniting Lovers Across Time.

Donations for Unrelated Use

If a donor wishes to contribute art and is willing to accept a cost-basis deduction, CAF America will check “yes” in Part IV of Form 8283 when asked if the donation will be put to an unrelated use. This means that the donor may advise the art as an immediate grant, or advise that the art is sold and the proceeds are used for future grantmaking.

Once a charitable organization becomes eligible with CAF America, it is added to the CAF America Global Charity Database. The beneficiary in question can then receive grants from CAF America at the recommendation of any CAF America donor during its eligibility period. Eligibility with CAF America lasts for three years for the United Kingdom, Australian, and Canadian charitable organizations and up to two years for charitable organizations from all other countries.

If an organization’s eligibility expires, it must renew its status in order to receive future grants. The CAF America renewal process is shorter and organizations are only required to submit an updated Grant Eligibility Application (GEA), a copy of updated financials, current board of trustees/directors, and any new or updated governing documents.

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