Gifts of Real Estate

Gifts of real estate to a ministry can bring incredible opportunities and headaches—opportunities because of the potential dollars that may be realized for ministry and headaches because of the administrative effort required to process many of these gifts.

When drafting a real estate gift policy, consider these issues:

  • Inspection of the property. A ministry should not accept a gift of real estate without first inspecting the property. A cursory inspection will make sure there are no visible environmental hazards on the property and determine if there are any obvious marketability issues.

  • Information about the property. The prospective donor should provide the following information about the property:

    • A survey

    • A legal description

    • The names of any co-owners and their ownership shares

    • A copy of recent tax statements

    • A copy of any recent appraisals

    • Information on any current leases or contracts outstanding on the property

    • A brief description of the current use of the property

  • Debt on the property. The ministry needs to know the details of any debt on the property and should decide in advance how much debt is acceptable. If the ministry assumes a mortgage, it will usually pay unrelated business income tax on the income from either the rental or sale of the property.

  • Disposing of the property. Will it be the ministry’s policy to sell the property as soon as possible? If so, the ministry must have full authority to decide the buyer and the sale price. Too often, donors have prearranged a sale and expect the property to be immediately sold to the buyer of their choice at a price agreed upon before the donation. This situation places the ministry in a very awkward position.

    If the sale is prearranged, the IRS may attribute the gain on the sale by the ministry to the donor. In this instance, the donor would have to pay tax on the difference between what the donor originally paid for the property and the sale price the ministry receives. Also, an immediate resale could fix the value of the donor’s gift to an amount lower than the donor would like to claim as a tax deduction.

  • Environmental issues. Avoid property that has signs of environmental problems. A ministry will probably be liable for any cleanup costs—even if the property was contaminated before the ministry received it. Ministries should generally not accept gifts of real estate that could result in liability for environmental contamination. It is wise to perform a Level I Environmental Site Assessment before accepting a gift of real estate.


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.