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Thursday June 13, 2024

Case of the Week

Exit Strategies for Real Estate Investors, Part 13


Karl was a man with the golden touch. Throughout his life, it seemed every investment idea that he touched turned to gold. By far, Karl was most successful with real estate investments. It was definitely his passion.

Amazingly, Karl continued to buy and sell real estate at the age of 85. His latest venture led him to a great investment property. It was a “fixer-upper” commercial building in a great area. While other nearby buildings sold for over $2 million, the seller needed to sell quickly and was asking just $1 million.

The condition of the building turned many buyers away. It was being sold “as-is,” but Karl was not deterred. He could see great potential with the building and knew it would not take much to get it to market condition. Therefore, Karl swooped in, bought the building for $1 million and instantly hired contractors to refurbish the place.

After three months of hard work refurbishing the building, the place looked like new! In the end, Karl invested $250,000 in the building, bringing his total investment in the property to $1.25 million. One month after the completion of the work, Karl was contacted informally by a company that expressed an interest in the building – a $2 million interest! This was no surprise to Karl. He knew the building was another great buy.

After Karl learned about the benefits of a FLIP CRUT, he eagerly wanted to move forward. (See Parts 1 and 2 for a full discussion of this decision.) It looked like the perfect solution. However, Karl did still have some important questions.


After learning that an appraisal and IRS Form 8283 were required, Karl wondered what reporting requirements were imposed upon the charitable donee or CRT trustee in such a situation.


When the charitable donee or CRT trustee signs a donor’s IRS Form 8283 Part B, that person incurs an obligation to file Form 8282 if the donated property is sold or disposed of within three years. This obligation only applies to property where the donee signed the appraisal summary. Thus, gifts of property where only Form 8283 Part A is completed are not subject to this rule. Because the FLIP CRUT trustee will sign Form 8283 upon receipt of Karl’s building, he or she is subject to the Form 8282 rules.

A disposition is defined as the sale, consumption or gift of the "charitable deduction property." There are some exceptions to this rule. For instance, Form 8282 is not required when the donee uses or consumes the property for its exempt purpose. In this case, the FLIP CRUT trustee intends to sell the building within three years. Therefore, the sale of the building within three years will trigger a Form 8282 filing. Form 8282 must be filed within 125 days of the sale of the property.

Form 8282 disclosures include: donor and donee personal information, date of gift and date of disposition, description of property and amount received by donee upon sale or disposition. The donee must provide the donor with a copy of Form 8282.

A failure to file Form 8282 or provide a copy to the donor may subject the charity to a penalty. Such penalties are as follows:

Failure to File Penalty: $50 per return

Failure to Give Copy to Donor: $50 per return

Fraudulent Identification of Tangible Personal Property: $10,000

Editor’s Note: In Part 12 of this case study series, we address IRS Form 8283.

Published March 1, 2024

Previous Articles

Exit Strategies for Real Estate Investors, Part 12

Exit Strategies for Real Estate Investors, Part 11

Exit Strategies for Real Estate Investors, Part 10

Exit Strategies for Real Estate Investors, Part 9

Exit Strategies for Real Estate Investors, Part 8


"Members of the Oxy community who support Oxy through their estate plans have provided us with an incredibly distinctive gift-an infinite investment in the College. We are grateful to these generous donors whose forethought will allow Oxy to deliver our exceptional liberal arts education to generation upon generation of talented students."

- President Harry J. Elam, Jr.

"Oxy showed me that the path to one's goals need not be linear or conventional. I learned how to think, to write, to create; to trust my instincts and pursue my interests with passion and a standard of excellence. Not a day has passed that I have not been rewarded in some way by my Occidental education."

- Michael J. Fields '70

Michael and his wife Pamela recently documented an estate gift to support the Obama Scholars Program and the EdgertonOccidental Merit Scholarship.