Policy for Acceptance of Real Property
Real property may be accepted as a gift or acquired by other means agreed upon by the University System of Maryland Foundation as long as it conforms to USM policies for solicitations and contributions, and as long as it meets the following criteria and requirements:
- System-related Property: property that will be held and/or developed for the benefit of the University System of Maryland. All expenses that USM Foundation incurs in holding such property shall be reimbursed according to the terms of an agreement with the System.
- Investment Property: Property that will be held or developed in order to provide income to the USM Foundation. The USM Foundation may retain ownership of the land, and will participate in the profits of its development in conjunction with experienced private sector development companies. The Enterprise Committee and the Executive Committee shall approve proposals for the development of any investment property before submission to the Board of Directors for final approval.
- Other Property: Property that does not lend itself to profitable development or use by the System or the USM Foundation. Normally, the minimum value of real property the USM Foundation will accept, but neither uses or develops, shall be $25,000, as based upon a current appraisal provided by the prospective donor at the time of the proffer of the property.
The minimum value of real property given to a charitable remainder unitrust shall be $50,000, as based upon a current appraisal provided by the prospective donor at the time of the proffer of the gift.
Upon acceptance, the USM Foundation may either immediately place this property for sale or hold for future appreciation, at its option.
The USM Foundation will generally not accept the following types of real property:
- Time share units
- Distressed property: property that would require the USM Foundation to make major repairs, or to provide for renovation or remodeling to be considered salable
- Mortgaged property except in the most exceptional of circumstances
- Obsolete property: property on which a zoning change or use has seriously and detrimentally affected the value of the property to such an extent that it can no longer be profitably used
- Environmentally damaged property.
The USM Foundation may contract for the provision of real estate services (e.g., real estate brokerage services) for its benefit, or for that of the System, if approved by the USM Foundation Board of Directors.
Procedures for Real Property Gifts
Information required to evaluate a proposed real property gift:
- Donor must indicate a clear charitable intent when offering real property as a gift.
- Donor must provide a current appraisal performed by a certified appraiser familiar with that type of property. The appraisal should be done within 60 days of the date of the gift.
- The appraiser should be informed that the appraisal will be used to determine the value of a gift for IRS purposes, and the appraisal must be conducted under those criteria. The latest copy of the tax assessment notice is not sufficient to determine the market value of the property.
- The IRS has ruled that the donor may deduct the cost of the appraisal as an expense paid in connection with the determination of the donor’s income tax liability.
- The title report may also qualify as a deduction as an expense paid in connection with the determination of the donor’s income tax liability.
- The donor is encouraged to consult with his/her tax accountant to confirm this.
- An environmental assessment must be performed prior to acceptance of any commercial property.
- The donor may or may not be requested to pay for, or assist in paying for, the assessment.
The Development Officer must explain the following requirements to the donor, and must be sure that the donor understands them, before the real property gift may be accepted by the USM Foundation:
- The IRS requires the donor to fully relinquish custody and control over the property. Real property gifts must be placed under the control of and for the exclusive use of USMF in order to qualify for the charitable tax deduction.
- The development officer working with the donor must carefully explain that USMF policy for real property gifts is to sell such gifts as soon as possible, except in the most exceptional circumstances.
- If the donor claims the appraised price as his/her tax deduction and USMF sells the property for less during the first two years following the gift, the donor may be required to amend his tax return to reflect the lower purchase price. After the initial two years, the donor is not required to amend his/her tax return if the gifted property sells for less than the appraised price.