Owners of historic property have several options when considering its long-term disposition, including donating a full or partial interest to Preservation Durham. In most cases, this donation will result in the assurance of long-term preservation of the property and a tax benefit for the donor.
Properties may be donated outright to Preservation Durham. The donor may take a tax deduction for the fair market value of the property. Depending upon the donor’s wishes and the type and location of the property, PD may retain and operate the property or sell the property to a responsible steward. In the event of a sale, PD may put preservation covenants in place to ensure the long-term preservation of the property.
A LIFE ESTATE
A property owner may wish to ensure the disposition of property after their death but remain with the property in the near term. In such a case, the owner can donate the property to Preservation Durham subject to a life estate for themselves, their spouse and/or their heirs. This allows the owner to continue to reside in and make use of the property during their lifetime. After the passing of the last heir, the property passes in its entirety to PD. The specific terms of the life estate and ultimate disposition of the property can be detailed at the time of donation.
Owners who wish to retain control of their property but want to ensure the long-term preservation of its historic integrity may donate a historic preservation easement to Preservation Durham. An easement is a legally binding agreement between the owner/donor and a preservation organization/recipient that is recorded with the property’s deed. The agreement specifies that the owner agrees to maintain the property’s historic integrity and gives the recipient organization the right to review alterations to the property and enforce the agreement. The owner retains the right to use, occupy and pass on the property. The easement is binding on all future owners and is maintained in perpetuity, ensuring the long-term future of the property.
The donation of an easement may also entitle the owner to a tax benefit. A tax deduction may be taken for the value of the easement, which is typically determined by property appraisals before and after the restrictions are put in place. Because future development of the property may be restricted, there may be a corresponding value reduction. This reduction may also apply to local property tax assessment. Each property is different, and the value of an easement must be individually determined. Click on the image below to see a sample of the protective covenants that would be applied to the property by PD before selling it to a new owner.
Please consult with your own financial adviser regarding the potential tax benefits of any significant donation to Preservation Durham. IRS publication 526, which discusses donations of property to charitable organizations, may be helpful.